Key Takeaways:
- RGP offers a forward dividend yield of about 9.5%, more than double its 5-year average.
- The company has zero net debt and over $70 million in cash, with a clean balance sheet.
- Even though analysts see 81% upside for the stock today, investors be cautious unless they really believe in the business’s ability to see increased demand.
- Get accurate financial data on over 100,000 global stocks for free on TIKR >>>
Resources Connection (RGP) may look like a compelling value play at first glance. With a $130 million enterprise value, it remains under the radar for most institutional investors and hedge funds.
RGP is a global consulting firm that provides on-demand professionals and project-based support in areas like finance, accounting, IT, risk, and HR. It works with many Fortune 500 companies and focuses on business transformation and compliance needs.
The stock currently yields about 9.5%, has no debt, and holds over $70 million in cash. Analysts are optimistic, projecting up to 80% upside from current levels.
Still, there are real risks to weigh, including declining earnings and longer-term threats from automation and AI. RGP may be worth a closer look for contrarian value investors who are comfortable with uncertainty.
Why Is RGP’s Stock Down 70% in the Past 3 Years?
RGP’s share price has dropped about 70% over the past 3 years.
Revenue has declined in the past 2 fiscal years, and the company’s fixed cost base has put pressure on operating margins.
Here’s what’s affecting RGP stock the most today:
- Declining Revenue and Profitability: RGP has consistently experienced a decrease in revenue, notably within its On-Demand Talent segment, which saw a large drop in revenue due to reduced demand for interim support services. This decline in core business segments has led to diminished gross margins and overall profitability.
- Competitive Pressures and Market Shifts: The company is contending with increased competition from gig economy platforms and the integration of AI-driven solutions in professional services. These market shifts have challenged RGP’s traditional consulting model, leading to a loss of market share and pricing pressures.
- Significant Goodwill Impairments: In fiscal 2025, RGP recorded a substantial non-cash goodwill impairment charge of $79.5 million, primarily affecting its On-Demand Talent and Europe and Asia Pacific segments. This impairment reflects a reassessment of the company’s future earnings potential and has negatively impacted investor confidence.
It’s worth noting that the rise of AI in professional services could permanently reduce RGP’s earning potential. These changes may disrupt the company’s business model and significantly affect its long-term outlook.
Still, RGP remains profitable, debt-free, and cash-flow positive (for now).
Analysts Think the Stock Has 80% Upside Today
Wall Street analysts currently have an average price target of about $9.67/share for RGP, which implies the stock has about 81% upside since it’s trading around $5.35/share today.
It’s worth noting that analysts see more upside for the stock today than in the past year. This suggests that the stock might have oversold today:
Find stocks that are more undervalued than Resource Connections today (It’s free) >>>
1: Dividend Yield
RGP currently offers a forward dividend yield of 9.5%, which is well above its 5-year average of about 4%.
This is due to the company’s share price falling because management hasn’t increased dividends in the past few years.
This 9.5% dividend will likely be cut in the next few years as earnings continue to face pressure.
See Resource Connection’s full dividend stats with TIKR. (It’s free) >>>
2: Dividend Safety
For years leading up to 2021, RGP had been growing its dividend at double-digit annual rates (this isn’t shown in the chart below).
Recently, the business has come under severe revenue pressure, which has threatened earnings and the company’s ability to continue paying dividends.
For fiscal year 2024, RGP had a dividend payout ratio of about 60%, based on normalized EPS of $0.93 and dividends per share of $0.56.
This year, RGP is expected to earn just $0.11 per share, which falls short of its $0.52 dividend. Earnings are projected to recover to $0.53 per share in 2026, but nearly all of that would go toward the dividend.
If the company can return to consistent earnings growth after 2026, the stock could look undervalued today. Its strong balance sheet and negative net debt help reduce risk. Still, investors should consider the possibility that AI may be a lasting threat to RGP’s consulting model.
See Resource Connection’s full growth forecast and analyst estimates. (It’s free) >>>
3: Dividend Growth Potential
Analysts expect RGP’s dividend to decline over the next few years as the company adjusts its payout to better align with earnings. With EPS projected to fall well below the current dividend in the near term, a cut seems likely unless profitability improves.
However, if earnings recover meaningfully after 2026, the company may be able to maintain a stable dividend or gradually increase it again.
Its strong balance sheet and lack of net debt provide some flexibility, but long-term dividend growth will depend on whether RGP can adapt to structural changes in the consulting industry.
TIKR Takeaway
Resources Connection (RGP) offers a rare combination of a double-digit dividend yield, no net debt, and a valuation near all-time lows. But recent revenue declines and the rising threat of AI disruption in professional services raise serious questions about the company’s long-term outlook.
While a recovery in earnings could create upside, the risks are significant. RGP may appeal to contrarian investors, but it’s a bet that requires patience and a strong tolerance for uncertainty.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
