Human resource consulting firm Robert Half International Inc. (RHI) operates through temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services segments in the United States, Europe, Asia, and Australia. The stock has gained 63.5% over the past year, driven by high demand for temporary and part-time staffing because many businesses have not been able to afford full-time employees due to pandemic-related business disruptions.
RHI’s wholly owned subsidiary, Protiviti, has witnessed double-digit year-over-year revenue growth. In fact, last month it ranked first on Forbes’ annual list of America’s Best Professional Recruiting Firms and America’s Best Temporary Staffing Firms.
The stock is trading just 1.3% below its $91.28 all-time high, which it hit on May 10. Given its solid earnings growth outlook, we believe it is poised to maintain its rally. Here is what we think could shape RHI’s performance in the near term:
While the HR consulting and staffing industry suffered a slowdown amid the pandemic last year, the rising demand for temporary and part-time stuffing helped RHI generate decent growth. Given the economic recovery this year, businesses are now seeking the help of HR consultancy firms with personnel recruitment and retention, determining working hours and maintaining smooth employee relations and communication. Consequently, the demand for HR consulting and staffing services is expected to grow. Also, since employee hiring is expected to surge significantly this year on the back of massive governmental support , it could present a huge opportunity for companies like RHI.
Strong Growth Outlook
A $1.05 consensus EPS estimate for the current quarter, ending June 2021, indicates a 156.1% improvement year-over-year. Furthermore, its EPS is expected to rise 51.1% in the current year, and at a 27.3% rate per annum over the next five years.
Analysts expect RHI’ revenues to rise 33.4% year-over-year to $1.48 billion in the current quarter and 15.1% to $5.88 billion in the current year. Also, its revenue is expected to increase 9% from its year-ago value to $6.41 billion.
RHI’s service revenues under Protiviti increased 35.1% year-over-year to $397.4 million in the first quarter, ended March 31, 2021. Its gross margin was $561.71 million on a reported basis for this quarter. The company’s net income rose 23% from the prior-year quarter to $110.6 million. Also, RHI’s EPS increased 24.1% year-over-year to $0.98 over this period.
RHI’s 2.1% trailing-12-month asset turnover ratio is 176.6% higher than the 0.8% industry average. In addition, the company’s 39.2% trailing-12-month gross profit margin compares favorably with the 29% industry average. RHI’s ROA and ROTC of 12.8% and 13.5%, respectively, are 222.3% and 139.6% higher than their industry averages.
In terms of non-GAAP forward PEG, RHI is currently trading at 1.42x, which is 21.3% lower than the 1.81x industry average. The stock’s 1.66x forward EV/Sales is 17.1% lower than the 2.01x industry average. And RHI’s 15.72 forward EV/EBIT ratio is 14.4% lower than the 18.37x industry average.
POWR Ratings Reflect Promising Outlook
RHI has an overall rating of B, which translates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. In terms of Quality Grade, RHI has an A. This is in sync with the company’s 28.1% ROE, which is significantly higher than the 9.8% industry average.
Click here to see the additional POWR Ratings for RHI (Value, Stability, Sentiment, Growth and Momentum).
The stock is ranked #6 of 20 stocks in the A-rated Outsourcing – Staffing Services industry.
If you’re looking for other top-rated stocks in the same industry with an Overall POWR Rating of A or B, you can access them here.
RHI’s staffing operations surged 22% sequentially in its last reported quarter, outperforming historical sequential trends. To attract and retain new talent, organizations are increasingly turning to professional recruiting firms. This should enable RHI to witness a sustained demand for its wide array of service offerings. As such, we believe the stock is well-positioned to maintain its rally.
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RHI shares were trading at $90.17 per share on Friday morning, up $0.10 (+0.11%). Year-to-date, RHI has gained 45.61%, versus a 13.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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