RESOURCES CONNECTION, INC. (RGP) stock intrinsic value fair value estimate & owner earnings analysis

RGP (Resources Connection) is a global professional services firm that supplies experienced, on-demand consultants to large companies for finance and accounting projects, HR and technology transformation, and general business consulting. Clients bring RGP in for defined projects rather than hiring permanent staff, so the business rises and falls with how much discretionary project spending its corporate clients are doing. Revenue peaked at $805 million in fiscal 2022 during an unusually strong post-pandemic surge in demand for flexible talent, then fell for four consecutive years to $452 million in fiscal 2026 - a 44% decline from the peak - and the company posted a net loss and negative owner earnings for the first time in the decade we reviewed. Management is explicit about part of the cause: clients are increasingly using AI and automation to handle the kind of routine operational accounting work RGP has traditionally staffed, while its higher-value consulting projects have faced longer sales cycles. This is a real, ongoing shift in what companies need, not just a temporary pause in spending. RGP has responded with two rounds of workforce reductions (October 2025 and January 2026), consolidated office space, and sold its Sitrick crisis-communications unit to sharpen its focus on core consulting. It expects this restructuring to be substantially finished in the first half of fiscal 2027. The company also cut its dividend roughly in half during fiscal 2026, a sign management itself expects a structurally lower earnings base for a while. Importantly, RGP carries essentially no debt, so this is a demand and mix problem, not a solvency one. Because this is a cyclical, people-based business, we set the normal, sustainable level of owner earnings using a full swing of the last cycle - from a soft period years ago, through the unusually strong 2022 boom, back down to today's trough - rather than anchoring on either extreme. In the bear case, AI-driven erosion of routine accounting placements keeps outrunning growth in higher-value consulting for years, sales cycles stay long, and the business only ever finds a small, marginally profitable footprint - which is worth very little today. In the base case, the restructuring already underway delivers the savings management expects, the decline in traditional placements levels off over the next couple of years, and the business gradually shifts toward the better-priced consulting and AI-advisory work it is already emphasizing (U.S. bill rates actually rose in fiscal 2026 even as volumes fell), returning owner earnings to roughly its historical mid-cycle level - not the unusual 2022 peak - over several years. In the bull case, the decline in routine placements bottoms out within a year or two and the consulting side, helping clients implement the same AI tools that are disrupting the old business, grows briskly and profitably. RGP has no expiring contracts or wasting assets - its consultant network is continuously replenished through ordinary recruiting costs already included in its earnings - so we assume it can sustain whatever level it reaches by year ten indefinitely, with no further real growth in the base and bear cases and only modest growth in the bull case. That said, most of the estimated value in every case comes from this long-run staying power rather than the next few years of results, so the valuation rests heavily on a judgment call about whether the business remains relevant to its clients over the next decade and beyond - which is genuinely uncertain given the pace of change in AI-driven automation. Given that uncertainty, the margin-of-safety price is set at a meaningful discount, and it depends on the revenue decline actually stabilizing.