This company provides staffing and risk consulting services in North America, South America, Europe, Asia, and Australia. The company recently beat its analysts’ estimates b a penny.
Robert Half International Inc. (RHI)
from Validea Hot List
Robert Half International Inc. (RHI)
Strategy: P/E/Growth Investor, based on our analysis of the strategy of Peter Lynch. This methodology would consider RHI a “fast-grower”.
P/E/GROWTH RATIO: [PASS]
The investor should examine the P/E (24.16) relative to the growth rate (43.02%), based on the average of the 3, 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for RHI (0.56) makes it favorable.
SALES AND P/E RATIO: [PASS]
For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth high enough to support a P/E above this threshold. RHI, whose sales are $4,306.6 million, needs to have a P/E below 40 to pass this criterion. RHI’s P/E of (24.16) is considered acceptable.
EPS GROWTH RATE: [PASS]
This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for RHI is 43.0%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered ‘OK’. However, it may be difficult to sustain such a high growth rate.
TOTAL DEBT/EQUITY RATIO: [PASS]
This methodology would consider the Debt/Equity ratio for RHI (0.16%) to be exceptionally low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company.
FREE CASH FLOW: [NEUTRAL]
The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for RHI (2.66%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.
NET CASH POSITION: [NEUTRAL]
Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for RHI (4.43%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.
INSIDER TRANSACTIONS: [PASS]
John Reese, Validea Hot List Newsletter, www.validea.com, 877-439-0506, May 9, 2014