Resources Connection (RGP) AI Stock Analysis

132 Followers

Top Page

Resources Connection

(NASDAQ:RGP)

43Neutral

Resources Connection faces significant challenges with declining revenue and profitability, evidenced by negative income statement metrics. The stock's bearish technical indicators and negative valuation metrics further weigh on its outlook. Despite strategic initiatives highlighted in the earnings call to improve international growth and efficiency, immediate market challenges and substantial goodwill impairment continue to pose risks.

Resources Connection (RGP) vs. S&P 500 (SPY)

Market Cap

$176.92M

Dividend Yield10.47%

Average Volume (3M)352.18K

Price to Earnings (P/E)―

Beta (1Y)1.06

Revenue Growth-16.27%

EPS Growth-589.83%

CountryUS

Employees722

SectorIndustrials

Sector Strength70

IndustryConsulting Services

Share Statistics

EPS (TTM)-3.28

Shares Outstanding33,069,275

10 Day Avg. Volume576,968

30 Day Avg. Volume352,181

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.38

Price to Cash Flow (P/CF)31.10

P/FCF Ratio31.10

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$10.00

Price Target Upside83.49% Upside

Rating ConsensusHold

Number of Analyst Covering2

Resources Connection Business Overview & Revenue Model

Company DescriptionResources Connection, Inc. (RGP) is a multinational consulting firm providing professional services and business consulting solutions. The company operates across various sectors, including finance, human resources, information management, and supply chain management. RGP offers clients project management and execution, business transformation, and other advisory services to address their strategic and operational challenges.

How the Company Makes MoneyRGP generates revenue primarily through the provision of consulting services to a diverse client base. The company's revenue model is centered around charging for consulting engagements on a project basis, typically through hourly billing or fixed-fee arrangements. Key revenue streams include consulting fees from finance and accounting solutions, human capital services, and information technology consulting. RGP's earnings are bolstered by its ability to maintain long-term relationships with clients and leverage its global network of consultants to deliver specialized expertise across different industries. Strategic partnerships with other consulting firms, software providers, or industry-specific experts may also enhance RGP's service offerings and contribute to its revenue.

Resources Connection Financial Statement Overview

Summary

Resources Connection is facing challenges in revenue and profitability, with declining income statement metrics. The balance sheet remains strong with low leverage but reduced equity. Cash flow generation has weakened, particularly in free cash flow, impacting future operational flexibility.

Income Statement

Negative

The company has experienced a significant decline in revenue and profitability, with TTM revenue falling from $632.8 million to $560.2 million and net income turning negative. Gross profit margin decreased to 37.3% in the TTM period from 38.9% in 2023. The net profit margin showed a stark decline to -19.3% in TTM from 3.3% annually in 2023. EBIT and EBITDA margins have also turned negative, indicating operational challenges.

Balance Sheet

Positive

The company maintains a healthy equity position with an equity ratio of 73.9% in TTM. The debt-to-equity ratio remains low at 0.10, indicating low leverage. However, there is a decline in stockholders' equity from $418.8 million in 2023 to $277.8 million in TTM, which could be a concern if the trend continues.

Cash Flow

Neutral

Free cash flow has significantly decreased in the TTM period to $2.8 million from $20.8 million in 2023, impacting the free cash flow to net income ratio. Operating cash flow remains positive but has decreased, reflecting challenges in cash generation compared to prior periods.

TTM	Dec 2023	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Breakdown
Income Statement		Total Revenue
560.19M	632.80M	775.64M	805.02M	629.52M	703.35M
	Gross Profit
209.08M	246.07M	313.14M	316.64M	241.40M	275.48M
	EBIT
-119.10M	28.78M	72.79M	83.44M	22.95M	36.65M
	EBITDA
-72.20M	38.26M	83.94M	92.52M	33.41M	53.79M
	Net Income Common Stockholders
-108.00M	21.03M	54.36M	67.17M	25.23M	28.29M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
72.50M	108.89M	116.78M	104.22M	74.39M	95.62M
	Total Assets
375.63M	510.91M	532.00M	581.47M	520.64M	529.18M
	Total Debt
26.55M	13.32M	17.73M	75.55M	73.95M	129.90M
	Net Debt
-45.94M	-95.57M	-99.05M	-28.68M	-445.00K	34.27M
	Total Liabilities
97.80M	92.15M	117.48M	209.02M	191.10M	225.52M
	Stockholders Equity
277.83M	418.76M	414.52M	372.45M	329.55M	303.66M
Cash Flow		Free Cash Flow
2.77M	20.78M	79.62M	46.48M	36.10M	47.18M
	Operating Cash Flow
5.31M	21.92M	81.64M	49.44M	39.94M	49.52M
	Investing Cash Flow
-13.21M	-8.55M	3.94M	-2.96M	-3.84M	-26.77M
	Financing Cash Flow
-30.85M	-20.71M	-71.91M	-13.37M	-59.46M	30.90M

Resources Connection Technical Analysis

Technical Analysis Sentiment

Negative

Last Price5.45

Price Trends

50DMA

7.02

Negative

100DMA

7.68

Negative

200DMA

8.51

Negative

Market Momentum

MACD

-0.52

Positive

RSI

29.60

Positive

STOCH

31.72

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RGP, the sentiment is Negative. The current price of 5.45 is below the 20-day moving average (MA) of 6.23, below the 50-day MA of 7.02, and below the 200-day MA of 8.51, indicating a bearish trend. The MACD of -0.52 indicates Positive momentum. The RSI at 29.60 is Positive, neither overbought nor oversold. The STOCH value of 31.72 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for RGP.

Resources Connection Risk Analysis

Resources Connection disclosed 28 risk factors in its most recent earnings report. Resources Connection reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Resources Connection Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CRAI	75 Outperform	$1.14B	24.93	21.96%	1.08%	10.17%	24.74%
ICFI	66 Neutral	$1.53B	14.28	11.60%	0.67%	2.88%	33.76%
FC	63 Neutral	$262.48M	15.22	24.81%	―	2.53%	5.95%
Sector *	62 Neutral	$7.70B	13.14	3.53%	3.32%	3.90%	-14.25%
AERT	52 Neutral	$30.19M	0.42	112.00%	―	34.17%	―
FORR	51 Neutral	$169.69M	―	-2.45%	―	-10.05%	-288.36%
RGP	43 Neutral	$176.92M	―	-31.18%	10.47%	-16.27%	-589.83%

* Industrials Sector Average

Performance Comparison

RGP

Resources Connection

5.45

-5.22

-48.92%

CRAI

Cra International

168.51

26.52

18.68%

FORR

Forrester Research

8.78

-10.17

-53.67%

Franklin Covey Company

20.33

-18.67

-47.87%

ICFI

Icf International

83.01

-56.58

-40.53%

AERT

Aeries Technology

0.69

-1.42

-67.30%

Resources Connection Earnings Call Summary

Earnings Call Date: Apr 2, 2025 | % Change Since: -17.80% | Next Earnings Date: Jul 17, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed sentiment. The company showed strong international growth, improved operational efficiency, and technological investments as positive factors. However, these were offset by significant challenges in the US market, revenue declines in the on-demand segment, and a substantial goodwill impairment charge. The focus on international markets and operational efficiency provides hope for future growth, but immediate market challenges and revenue concerns persist.

Highlights

Revenue Achievement

Total revenue for Q3 was $129.4 million, in line with expectations despite client budget constraints and slower project ramp-ups.

International Growth

Strengthening across practices in Europe, Japan, and the Philippines with improvements in bill rates, pipeline expansion, and return of large project pursuits.

Consulting Segment Success

Achieved double-digit bill rate improvement, with enterprise engagements increasing by over 20%. Doubled the number of $1 million-plus engagements from last year.

Operational Efficiency

Lowered cost structure, reducing run rate SG&A by 8% since the first fiscal quarter through optimized headcount and reduced discretionary spending.

Technological Advancements

Investments in technology and infrastructure enhancements in North America to leverage AI and automation for client service and recruitment.

Lowlights

US Market Uncertainty

Sluggish US market due to increased uncertainty and decreased consumer confidence, impacting decision-making and project delays.

Revenue Decline in On-Demand Segment

On-demand segment revenue down 24% from the prior year, with adjusted EBITDA margin falling from 11% to 5%.

Goodwill Impairment

Recorded a non-cash goodwill impairment charge of $42 million due to continued sluggish demand in on-demand and consulting segments.

Challenges in China

Ongoing macroeconomic challenges in China impacting growth, despite optimism for future acceleration in project extensions.

Delayed Decision Making

Significant delays in project decisions and RFP outcomes due to government policy uncertainties and market conditions.

Company Guidance

During the call, Resources Connection, Inc. provided detailed guidance for the third quarter of fiscal year 2025, ending February 22, 2025. The company reported total revenue of $129.4 million, which aligned with expectations, despite client budget constraints and slower project ramp-ups. The gross margin was reported at 35.1%, better than expected, while SG&A expenses showed a notable improvement, lowering the run rate by 8% since the first fiscal quarter. The consulting segment saw a 13% increase in bill rates compared to the prior year, and the number of $1 million-plus opportunities doubled. However, the company noted a 2% decline in the consulting segment revenue year-over-year and a 24% decrease in the on-demand segment revenue. The Europe and Asia Pac segment experienced a 2% revenue decline, while the outsourced services segment showed a slight growth of 3%. Despite macroeconomic challenges, the company emphasized its strategic initiatives in enhancing client offerings, improving operational efficiency, and making targeted investments, with a focus on expanding in key markets like Southeast Asia and India. The fourth-quarter outlook anticipates revenue between $132 million and $137 million, with a projected gross margin of 36% to 37%.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.