Should Investors Rethink Korn Ferry After Analyst Upgrades and 8.6% Price Slip?

• Wondering if Korn Ferry is a hidden gem or just fairly priced? You are not alone in asking whether now is the right time to get in or out of this stock.
• After a subtle dip of 0.2% over the past week and a rough last month with shares down 8.6%, Korn Ferry may be signaling changes in investor sentiment. Its five-year gain of 67.7% reminds us it is no stranger to long-term growth.
• Recently, analyst upgrades and strategic acquisitions in the HR technology space have kept Korn Ferry in the financial headlines. This suggests that its shifting business mix could be influencing how investors view its prospects. Market chatter around talent management trends and elevated demand for workforce solutions also played into recent share price movements.
• If scorecards are your thing, Korn Ferry tallies an impressive 6/6 valuation score, indicating it is undervalued across all six of our standard checks. In this article, we will break down what that really means, using different valuation methods, and reveal why there might be an even better way to look at value by the end.

Find out why Korn Ferry's -14.0% return over the last year is lagging behind its peers.

Approach 1: Korn Ferry Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and discounting them back to today's dollars. This approach helps investors look beyond current earnings and instead focus on what the company is likely to generate in real money over the coming years.

For Korn Ferry, the most recently reported Free Cash Flow is $289.9 Million. Analysts typically forecast up to five years into the future, but in this analysis, projections extend to 2035 by extrapolating trends and expected growth rates. These rates range from 6.14% early on to about 3.38% later in the decade. By 2035, Korn Ferry's Free Cash Flow is expected to reach approximately $437.0 Million, with each future year's cash flow discounted to reflect its value in today's terms.

Based on these projections, the DCF model suggests Korn Ferry's shares are worth about $147.69 each. Compared to the current share price, this implies the stock is trading at a steep 56.1% discount to its estimated fair value, signaling it is significantly undervalued right now.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Korn Ferry is undervalued by 56.1%. Track this in your watchlist or portfolio, or discover 924 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Korn Ferry.

Approach 2: Korn Ferry Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is a dependable metric for valuing profitable companies like Korn Ferry, as it measures how much investors are willing to pay today for a dollar of current earnings. This multiple is especially useful when earnings are steady or growing because it reflects both the underlying performance and the market's expectations for the future.

Growth prospects and perceived risk are key drivers of what constitutes a "normal" or fair PE ratio. Higher expected growth or lower risk often justify a higher PE, while slower growth or greater uncertainty tend to push the ratio lower. This is why understanding Korn Ferry’s PE in context is so important.

Korn Ferry’s current PE stands at 13.8x, which is markedly below the industry average of 24.0x and the peer average of 31.1x. At first glance, this might suggest the market is too cautious, or that hidden risks are dragging valuations down. However, it is worth looking beyond simple comparisons.

This is where Simply Wall St's "Fair Ratio" comes into play. The Fair Ratio, calculated at 22.8x for Korn Ferry, combines several factors including the company’s growth outlook, profit margins, industry characteristics, market cap and risk profile. Unlike a straight comparison to industry or peers, the Fair Ratio provides a more nuanced and individualized benchmark for value.

Comparing these figures shows Korn Ferry’s PE is well below its Fair Ratio. This suggests the stock is currently undervalued on an earnings basis, reinforcing the conclusion that investors may be getting a bargain at today’s price.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1422 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Korn Ferry Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a simple, accessible way to tell your story about a company by connecting your expectations for its future revenue, earnings, and profit margins with your estimate of fair value. This is essentially your personalized investment thesis, all grounded in numbers.

Narratives link how you see Korn Ferry’s business evolving with a tailored financial forecast and a calculated fair value, helping you make sense of whether the current price means you should buy, hold, or sell. On the Simply Wall St platform, Narratives are available for millions of investors to explore and contribute to on each company’s Community page.

They update dynamically whenever new information, such as news or earnings releases, is available. This helps ensure that your story and valuation stay relevant in real time. For example, one Korn Ferry Narrative might assume revenue growth accelerates with AI investments and margins improve, leading to a fair value near $83.75. Another might weigh risks from economic headwinds and set a lower estimate around $73.59. These differences highlight how Narratives empower you to decide confidently, using your own reasoning alongside the latest data and diverse community perspectives.

Do you think there's more to the story for Korn Ferry? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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