Business Support Stocks

Robert Half International Inc Valuation – February 2016 $RHI

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Robert Half International Inc (RHI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Robert Half International Inc. is engaged in providing specialized staffing and risk consulting services. The Company provides staffing and risk consulting services through the divisions: Accountemps, Robert Half Finance & Accounting, OfficeTeam, Robert Half Technology, Robert Half Management Resources, Robert Half Legal, The Creative Group and Protiviti. The Company operates through three segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. The temporary and consultant segment provides specialized staffing in the accounting and finance, administrative and office, information technology, legal, advertising, marketing and Web design fields. The permanent placement segment provides full-time personnel in the accounting, finance, administrative and office, and information technology fields. The risk consulting segment provides business and technology risk consulting and internal audit services.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of RHI

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $4,934,213,008 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.08 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 114.29% Pass
6. Moderate PEmg Ratio PEmg < 20 15.30 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.99 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.08 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

RHI value chart February 2016

EPSmg $2.46
MG Growth Estimate 15.00%
MG Value $94.84
Opinion Undervalued
MG Value based on 3% Growth $35.72
MG Value based on 0% Growth $20.94
Market Implied Growth Rate 3.40%
Current Price $37.70
% of Intrinsic Value 39.75%

Robert Half International Inc. qualifies for the Enterprising Investor and the more conservative Defensive Investor. The Defensive Investor is only concerned with the high PB ratio. The Enterprising Investor only has concerns regarding the level of debt relative to the net current assets.  As a result, value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.00 in 2012 to an estimated $2.46 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.4% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Stage 3: Information for Further Research

RHI charts February 2016

Net Current Asset Value (NCAV) -$5.26
Graham Number $22.00
PEmg 15.30
Current Ratio 2.08
PB Ratio 4.99
Dividend Yield 2.12%
Number of Consecutive Years of Dividend Growth 4

 

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Most Recent Balance Sheet Figures

Balance Sheet Information Dec2015
Total Current Assets $0
Total Current Liabilities $655,549,000
Long-Term Debt $1,007,000
Total Assets $1,702,960,000
Intangible Assets $0
Total Liabilities $699,179,000
Shares Outstanding (Diluted Average) 132,930,000

Earnings Per Share History

Next Fiscal Year Estimate $2.85
Dec2015 $2.69
Dec2014 $2.26
Dec2013 $1.83
Dec2012 $1.50
Dec2011 $1.04
Dec2010 $0.44
Dec2009 $0.24
Dec2008 $1.59
Dec2007 $1.81
Dec2006 $1.65
Dec2005 $1.36
Dec2004 $0.79
Dec2003 $0.04
Dec2002 $0.01
Dec2001 $0.67
Dec2000 $1.00
Dec1999 $0.77
Dec1998 $0.69
Dec1997 $0.50
Dec1996 $0.34

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.46
Dec2015 $2.13
Dec2014 $1.71
Dec2013 $1.29
Dec2012 $1.00
Dec2011 $0.84
Dec2010 $0.88
Dec2009 $1.18
Dec2008 $1.58
Dec2007 $1.42
Dec2006 $1.08
Dec2005 $0.72
Dec2004 $0.43
Dec2003 $0.33
Dec2002 $0.53
Dec2001 $0.77
Dec2000 $0.77

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Business Support Industry – November 2015
The 8 Best Stocks For Value Investors This Week – 8/8/15
Robert Half International Inc. Analysis – August 2015 Update $RHI
47 Companies in the Spotlight This Week – 5/16/15
Robert Half International Quarterly Valuation – May 2015 $RHI

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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