Buy or Sell Robert Half Stock?

Robert Half (RHI) stock has jumped 28% during the past day, and is currently trading at $34.61. We believe there are several things to fear in RHI stock given its overall Weak operating performance and financial condition. This is aligned with the stock’s Low valuation because of which we think it is Fairly Priced.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $3.5 Bil in market cap, Robert Half provides staffing and risk consulting services globally, specializing in temporary and permanent placements for accounting, finance, office, administrative, and internal audit professionals.

[1] Valuation Looks Low

This table highlights how RHI is valued vs broader market. For more details see: RHI Valuation Ratios

[2] Growth Is Very Weak

• Robert Half has seen its top line shrink at an average rate of -9.1% over the last 3 years
• Its revenues have fallen -7.3% from $5.9 Bil to $5.5 Bil in the last 12 months
• Also, its quarterly revenues declined -7.5% to $1.4 Bil in the most recent quarter from $1.5 Bil a year ago.

This table highlights how RHI is growing vs broader market. For more details see: RHI Revenue Comparison

[3] Profitability Appears Very Weak

• RHI last 12 month operating income was $118 Mil representing operating margin of 2.2%
• With cash flow margin of 5.4%, it generated nearly $292 Mil in operating cash flow over this period
• For the same period, RHI generated nearly $156 Mil in net income, suggesting net margin of about 2.8%

This table highlights how RHI profitability vs broader market. For more details see: RHI Operating Income Comparison

[4] Financial Stability Looks Very Strong

• RHI Debt was $241 Mil at the end of the most recent quarter, while its current Market Cap is $3.5 Bil. This implies Debt-to-Equity Ratio of 7.0%
• RHI Cash (including cash equivalents) makes up $365 Mil of $2.8 Bil in total Assets. This yields a Cash-to-Assets Ratio of 12.8%

[5] Downturn Resilience Is Very Weak

RHI has fared much worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• RHI stock fell 47.8% from a high of $124.53 on 9 February 2022 to $65.02 on 31 May 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $88.16 on 28 December 2023 , and currently trades at $34.61

 
2020 Covid Pandemic

• RHI stock fell 46.4% from a high of $63.75 on 2 January 2020 to $34.17 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 10 November 2020

 
2008 Global Financial Crisis

• RHI stock fell 65.4% from a high of $41.62 on 22 February 2007 to $14.41 on 6 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 23 December 2013

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read RHI Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.