Unveiling Robert Half (RHI)'s Value: Is It Really Priced Right? A Comprehensive Guide
Robert Half Inc (NYSE:RHI) reported a daily gain of 2.49%, with a 3-month loss of 1.74%, and an Earnings Per Share (EPS) of 5.04. Despite these figures, the question remains: is the stock modestly undervalued? This article provides a comprehensive valuation analysis of Robert Half, encouraging readers to delve deeper into the company's financials and growth prospects.
Company Introduction
Established in 1948, Robert Half Inc is a renowned provider of temporary, permanent, and outcome-based staffing solutions. It caters to various fields, including finance, accounting, technology, legal, marketing, and administrative sectors. Its consulting subsidiary, Protiviti, specializes in technology, risk, auditing, and compliance matters. The company's primary market is the U.S., standing as one of the largest specialized firms in the highly fragmented U.S. staffing industry. With an annual revenue of around $7 billion, Robert Half's current stock price stands at $73.82, while its GF Value is $84.39, suggesting a potential undervaluation.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It's calculated based on historical multiples, an adjustment factor from GuruFocus based on the company's past returns and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to GuruFocus' valuation method, Robert Half (NYSE:RHI) is estimated to be modestly undervalued. The company's market cap stands at $7.90 billion, indicating that the stock may deliver higher long-term returns than its business growth due to its current undervaluation.
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Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, investors need to thoroughly review a company's financial strength before purchasing shares. Robert Half has a cash-to-debt ratio of 3.31, ranking better than 66.99% of 1039 companies in the Business Services industry. The overall financial strength of Robert Half is 8 out of 10, indicating strong financial health.
Profitability and Growth
Investing in profitable companies carries less risk, especially those that have demonstrated consistent profitability over the long term. Robert Half has been profitable for 10 years over the past decade. With revenues of $6.90 billion and an Earnings Per Share (EPS) of $5.04 in the past 12 months, its operating margin of 9.64% is better than 63.97% of 1052 companies in the Business Services industry. GuruFocus ranks Robert Half's profitability as strong.
Growth is a critical factor in a company's valuation. Companies that grow faster create more value for shareholders, especially if that growth is profitable. Robert Half's average annual revenue growth is 8.3%, ranking better than 61.91% of 974 companies in the Business Services industry. The 3-year average EBITDA growth is 20.1%, which ranks better than 67.1% of 845 companies in the Business Services industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is another way to evaluate profitability. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Robert Half's ROIC was 28.68, while its WACC was 10.91.
Conclusion
Overall, Robert Half (NYSE:RHI) stock is estimated to be modestly undervalued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 67.1% of 845 companies in the Business Services industry. To learn more about Robert Half stock, check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
