Over the past six months, Robert Half’s shares (currently trading at $53.16) have posted a disappointing 15.8% loss while the S&P 500 was down 1.1%. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Is there a buying opportunity in Robert Half, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons why RHI doesn't excite us and a stock we'd rather own.
Why Do We Think Robert Half Will Underperform?
Founded in 1948 as one of the first specialized staffing firms in the United States, Robert Half (NYSE:RHI) provides specialized talent solutions and business consulting services across finance, technology, marketing, legal, and administrative fields.
1. Long-Term Revenue Growth Flatter Than a Pancake
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Robert Half struggled to consistently increase demand as its $5.80 billion of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and signals it’s a low quality business. 
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Robert Half, its EPS declined by 9% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Robert Half’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Robert Half doesn’t pass our quality test. Following the recent decline, the stock trades at 17.6× forward price-to-earnings (or $53.16 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now. We’d suggest looking at the most entrenched endpoint security platform on the market.
Stocks We Like More Than Robert Half
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