Analysts' Choice: Robert Half Does The Job

9/7/2015


  Recent Price
$51
  Dividend
$0.80
  Yield
1.6%
  P/E Ratio
21
  Shares (millions)
134
  Long-Term Debt As % Of Capital
0%
  52-Week Price Range
$63.27 - $45.30

Staffing agency Robert Half International ($51; RHI) appears poised to benefit from the improving labor environment. The company holds an estimated 20% share of the fragmented U.S. market for temporary accounting and finance staffing, says J.P. Morgan Chase ($63; JPM).

Many human-resource departments saw major cuts in the past eight years, creating more demand for staffing agencies. Robert Half mostly focuses on midsized and small companies, which has increased its pricing power.

The U.S. labor market shows some signs of tightening, boosting worker's wages and Robert Half's billings. Unemployment crept down to 5.3% in July from 6.2% a year earlier, 7.3% a year before that, and the 10-year high of 10.0% in October 2009.

Outstanding operating momentum, long-term growth potential, and rising analyst estimates make us willing to look past Robert Half's middling valuation. The stock is a Long-Term Buy.

Business breakdown

Robert Half's per-share profits rose 27% in the 12 months ended June, benefiting from steadily expanding operating profit margins. Sales have advanced 12% in the past year, with all units increasing sales 9% or more. The U.S. accounts for about 77% of Robert Half's revenue.

Among Robert Half's primary business units, Accountemps (34% of revenue in the 12 months ended June) finds temporary workers for accounting and tax companies with seasonal swings in workloads. OfficeTeam (19%) places temporary and full-time administrative workers. The Protiviti unit (14%) offers risk consulting and internal-audit services. Other staffing businesses include technology consultants, legal support, advertising, and web design. Protiviti paced sales growth with a 21% increase over the last year.

The company has grown cash from operations in 18 of the past 20 quarters. Free cash flow climbed 20% to $231 million in the 12 months ended June. In February, Robert Half increased its quarterly dividend 11% to $0.20 per share, exceeding its five-year annualized growth rate of 9%.

Annual returns on assets, equity, and investment have steadily marched higher in each of the past five years — and all three metrics are on pace to rise again in 2015.

Conclusion

With the September quarter off to a strong start, management has guided per-share profits to rise 11% to 19% on revenue growth of 6% to 10%. Analyst estimates have crept higher since the quarterly report, as reflected by the stock's Quadrix® Earnings Estimates score of 78. Profit margins seem capable of widening further, given Robert Half's pricing power in an environment of rising wage inflation.

At 21 times trailing earnings, the stock trades 5% below the average for S&P 1500 Index employment agencies and 10% below its own three-year average. Shares also look attractive relative to historical norms based on price/cash flow and enterprise ratio.

An annual report for Robert Half International Inc. is available at 2884 Sand Hill Road, Suite 200, Menlo Park, CA 94025; (650) 234-6000; www.roberthalf.com.

ROBERT HALF INTERNATIONAL
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Jun '15
0.67
vs.
0.55
9%
63.27
-
54.58
27 - 23
Mar '15
0.58
vs.
0.45
11%
63.21
-
55.27
28 - 25
Dec '14
0.62
vs.
0.49
13%
58.30
-
45.30
27 - 21
Sep '14
0.63
vs.
0.48
14%
53.08
-
45.00
27 - 23
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2014
4.70
2.26
0.72
59.45
-
38.62
26 - 17
2013
4.25
1.83
0.64
42.33
-
30.64
23 - 17
2012
4.11
1.50
0.60
32.32
-
25.10
22 - 17
2011
3.78
1.04
0.56
34.26
-
19.69
33 - 19
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
92
91
59
97
70
78
37

   * Earnings exclude special items.
   † Quadrix scores are percentile ranks, with 100 the best.


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