Kelly Services Popped: What You Need to Know (KELYA)

Kelly Services Popped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Earlier today, improved profits and a big earnings beat helped lift shares of Kelly Services (Nasdaq: KELYA ) to an 11% gain -- then it all went away. As markets imploded toward day's end, Kelly lost almost every penny it had gained, and the shares ended up barely 1%.

So what: Exactly. So what? We're investing for the long term here at the Fool, so one-day gyrations in stock price shouldn't worry us as much as what might happen at Kelly over the next year -- and more.

Now what: And there's good news on that front. Thanks to Mr. Market's resetting Kelly's stock price to almost its pre-earnings level, you still have a chance to buy Kelly on the cheap. Right now, Kelly shares sell for as little as 11.4 times earnings -- but analysts are expecting Kelly to grow at 15% per year over the next five years. Free cash flow is impressive, too -- about $41.8 million for the past 12 months, or very near Kelly's level of reported earnings -- $44.1 million.

Kelly furthermore confirms that analyst growth estimates are close to the mark, as its customers are said to be "expecting economic expansion in the second half of 2011 to be stronger than the first." Long story short, 11 times earnings looks to be an attractive price to pay for 15% growth at Kelly. I'd be a buyer here.

Want to see how Kelly's growth thesis plays out? Add it to your Fool Watchlist.

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Fool contributor Rich Smith does not own (or short) shares of any stock named above. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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