Worried by last week's report that U.S. employment growth didn't quite meet expectations? Well, for a different take on the economy, buy yourself a ticket on Korn/Ferry (NYSE:KFY), which just announced the close of a banner year for its fiscal 2005. The headhunting firm reported a near 600% increase in its diluted earnings per share, with 36% revenue growth.

That's quite a contrast. While 36% growth is a big number in anyone's book, Korn/Ferry couldn't have translated that into a 600% growth in profits without accomplishing one important task: roping in costs. The company managed to hold its "compensation and benefits" costs down to a 32% increase, lower than revenue growth, for the year. It kept an even tighter lid on overhead costs; general and administrative expenses rose just 17%. Result: Korn/Ferry tripled its operating margin to 14.5% this year.

As usual, Korn/Ferry declined to provide its investors with a cash flow statement along with its earnings release (tsk, tsk). But, we can get an idea of the company's cash generation levels by examining its balance sheet. There we see that the firm nearly doubled its cash and equivalents over the past year, increasing its debt load only slightly. As of April 30, cash and equivalents stood at $207 million against long-term debt of only $45 million.

That doesn't give us a recent tally of free cash flow, but given that profits grew 34% year over year in Q4, revenues increased 27%, and Korn/Ferry historically produces cash flow in excess of reported GAAP earnings, it seems safe to assume that free cash continued flowing strongly through the final three months of the fiscal year. If that proves correct when the company ultimately produces its Form 10-K, cash flow statement and all, I suspect we're going to see the company trading at an attractive multiple to free cash flow. Couple that with the 15% yearly earnings growth analysts foresee over the next half-decade and Korn/Ferry could smell like a "buy" -- except for one caveat..

The other concern we raised three months ago, when reviewing Korn/Ferry's third-quarter earnings report, revolved around excessive stock dilution at the company. Things may be looking up on this front, but the problem still remains. Over the past year, weighted average shares outstanding increased just 2.7% on a basic share basis -- but 14.6% diluted. While that last figure is better than the 25% year-over-year increase we were seeing three months ago, it's still a mite high in this Fool's book.

Interested in taking a ride on this boat? Read up on Korn/Ferry's past cruises:

Fool contributor Rich Smith has no position, short or long, in Korn Ferry.