RHI Investment Analysis Report & Stock Research, Robert Half International, Inc.

Ockham's Rating/Recommendation Summary

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RHI Revenue

For a long time, value investors have used the current share price relative to sales per share levels as an important valuation tool. We utilize a historical weighted average methodology that treats recent years more importantly in the calculation. When looking at RHI through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 10 years are 1.91x and 1.07x respectively.

Utilizing this range we can see that RHI’s current Price to Sales per share ratio of 1.48x is somewhat below its historical weighted average by 1%. Given this level of sales per share, we suggest a neutral share price forecast. To the extent there is a further drop in the Price to Sales ratio from current levels, which would occur through some combination of increased sales per share or a decline in share price, we would only become more positive about the Price to Sales ratio outlook.

RHI Cash Earnings

Looking at RHI specifically in their Cash Earnings capabilities, Ockham views RHI as significantly above its historical average multiple of Cash Earnings. Looking at the last 10 years we can get a good understanding of what investors have grown to expect from RHI. For example, RHI's Cash Earnings ratio per share has fluctuated between 17.79 and 33.64 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where RHI is with respect to prior business periods.

So what does this tell us about RHI in particular? Basically, we would value the current level of Cash Earnings per share (which is at 44.34) as significantly overvalued. Just by looking at the last closing price of RHI, which was $30.15, we can see that compared to the historical high Price to Cash Earnings levels we calculated, the market has already rewarded RHI with a higher stock price. So basically, we don't view this level of Cash Earnings or stock price as compatible with a long term value at this point. Just remember, that does not mean that RHI may not have other merits with which to find a good investment opportunity, it just means that we would prefer to see either an increase in Cash Earnings or a decrease in stock price before we would become bullish on this metric.

RHI Dividends

While it is not necessary to pay an attractive dividend or a dividend at all, to receive a positive rating from Ockham, we view dividends as an additionally helpful measure in determining the future potential of any company.

In RHI’s case, the estimated annual dividend is $0.52 resulting in a current dividend yield of 1.72%. Similar to our review of Sales and Cash Earnings per share, we evaluate dividend yields from RHI against the historic high and low levels over the past 10 years. The highest dividend yield from RHI over this period was 3.41% while the lowest dividend yield was 0.00% A current dividend yield of 0.88% above the historical median is favorable in our analysis of RHI.