Korn Ferry: New Disclosures Highlight Resilient Digital And RPO Platforms Worth 12-14x EBITDA For 50-95% Upside

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About: Korn Ferry (KFY)
by: Kerrisdale Capital Management
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Kerrisdale Capital Management
Hedge fund manager, long/short equity, value, special situations
Summary

Blue-chip executive recruiting firm Korn Ferry trades for just 11x P/E and 7x F2021 EV/EBITDA despite a mix shift towards cyclically resistant database products and high-growth recruiting process outsourcing ("RPO").

A trio of Digital acquisitions closed in November add $35-40m of EBITDA and $0.40-0.45 to F2021 EPS, accelerating reported earnings growth in the fiscal year beginning April 2020.

Using public and private market comparable valuations, KFY’s Digital ($120m EBITDA) and RPO ($40m EBITDA) segments are worth KFY's entire market cap on their own.

With an additional $200m in core search and consulting EBITDA, KFY shares are worth $60-65, and up to $80 should industry growth return this year.

"I've heard a lot about Korn Ferry's ability to build a brand around digital transformation and attract the right leaders… and to make use of the data and insights to drive strategic sales growth… as