Robert Half International Inc. (RHI, Financial) is a global staffing firm founded in 1948. It specializes in staffing permanent and temporary jobs in the finance, IT and legal fields. The company has the following lines of businesses:
- Accountemps offers temporary staffing and short assignments for accounting professionals.
- Office Team places personnel in administrative functions such as receptionists, customer service reps or executive assistants.
- Robert Half Finance & Accounting places finance and accounting personnel for full-time positions.
- Robert Half Technology places IT professionals in full-time and contract positions for roles in web development, desktop support, networking, app development, database design, security, etc.
- Robert Half Legal places legal professionals in full-time and contract positions for roles such as attorneys, paralegals and legal administrative assistants.
- Robert Half Management Resources staffs full-time positions for senior roles in accounting and finance such as chief financial officer, controller, internal auditors, financial analysts, etc.
- The Creative Group staffs full-time and contract professionals in the areas of interactive media, design, marketing, advertising and public relations.
- Protiviti is a global consulting firm that helps companies on engagements in finance, technology, operations, governance, risk and internal audit. It provides solutions in areas such as business process improvement, internal audits, IT consulting, restructuring and litigation, risk and compliance, and transaction services.
RHI reports results into the three categories of temporary staffing, permanent placement and consulting services. Temporary staffing is the main driver of the company’s results. In 2015, Temporary staffing accounted for 77% of revenues and 69% of operating income.
From RHI 10-K
In 2015, RHI derived 80% of its revenue from the U.S. and 20% from international markets.
From RHI investor presentation
Industry
RHI estimates that the global staffing industry is a $400 billion market. The industry is highly fragmented. You can see from the table below that RHI compares very favorably with its peers. Its 10-year median ROA of 17.5%, ROE of 25.5% and ROC of 40.3% metrics are far superior to its competitors. Its valuation metrics compare favorably as well. Only Manpower has a lower EV/EBIT ratio of 8.3 compared to RHI’s 8.4 and it has the third-lowest PE at 14.1 behind Manpower and Kelly Services.
Numbers provided by GuruFocus
Closing thoughts
RHI has not had any losses since 1996. I don’t have data going back further than that. The company has had a long track record of producing outstanding results. CEO Harold Max Messmer Jr. has been running the company since 1987 and led the company from revenues of $7 million in 1986 to $5 billion in 2015.
The primary risk that I see with RHI is that it’s a very cyclical company. During economic downturns, the company’s revenues decline significantly as shown in the graph below. You can see how RHI’s revenue dropped in 2002 and 2009. The reason for the cyclicality is because as sales go down, RHI’s clients need less supporting staff and temporary labor is one of the easiest areas to cut costs. In addition, when times are bad, projects are delayed or cancelled and contract workers are cut.
To better illustrate the cyclicality, here's the net income trend from 1990 to 2015.
On the plus side, the company offers a dividend with a yield of 2.27% and a payout ratio of 0.3. You can see how the dividend has grown in the last 10 years.
RHI is a high quality company that is on my watchlist. I would prefer to pick up shares during a recession. For those who are searching for dividend yield or are willing to buy and hold for a long time, this may be a stock to consider.
Disclosure: I don’t own any RHI.
