Robert Half: A Stellar Long-Term Pick
Helen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The job market has been, well, terrifying over the past few years. Plenty of people have been out of a job and unable to find work creating devastating circumstances. For the lucky ones, working in jobs that they hate, sitting still until the market improves has been the only real option.
Things are starting to improve. So it’s no surprise that recruiting and staffing big wig Robert Half International (NYSE: RHI) is coming back. They are not rated all that highly, but the majority of investment gurus are expecting Robert Half to outperform and recommend buying and holding right now.
Robert Half is a staffing company that specializes in accounting and finance employees. In a downturn, the finance department tends to see less downsizing than, say, manufacturing jobs. But there are always ways to combine responsibilities so that you can do as much with fewer employees in the accounting department. On the other hand, when things start to look better, the first department that needs to be running at full steam is finance. Things are looking better.
Robert Half was a little short on their estimates for the past quarter, but they are still growing at a decent clip. They saw growth of 14% compared to last year’s fourth quarter revenue, up to $973.5 million from $851.6 million, and they are expected to grow to over $4 billion in total revenue for fiscal year 2012.
Part of their recovery from the employment lag has to do with their technology division, Robert Half Technology. This growing branch is bringing the IT crowd into their incredibly successful finance and accounting staffing services and has done nothing but grow in revenue over the past couple of years.
The last few months tell an interesting story. At the end of last year, things hit bottom in a way that hurt falling in August from about $28 per share to just $21 per share, and dropping all the way to $19 per share before heading back up again. But as soon as January of 2012, they were back up to the $30 per share mark, and they’ve steadily stayed close to that over the past couple of months. With things looking up with an improving jobs report, the trend should be upwards, especially over the next couple of years.
Not a Short Term Investment
This is not a stock to buy with cash you might need in a couple of months. Robert Half publishes its own report about what CFOs around the U.S. are planning for hiring in the coming months and the vast majority say they are happy where they are. Which means they do not intend to increase their staff anytime soon and that could spell very little growth for Robert Half due to new hire contracts.
However, that is not the entire story. What we are likely to see is more interesting for Robert Half’s stock price, which is that people are going to start looking for better jobs than what they’ve been stuck with through the downturn. Some CFOs are starting to hire again – only about 4% - and they will probably find skilled staff in someone else’s office. Now is a great time to hire. All the talent is out there, waiting for any job, and willing to work for a lot less than they would have if they had been hired five years ago. Add to that the likelihood of dissatisfied workers starting to think about a switch and Robert Half suddenly looks poised to outperform over the next year in a big way.
While CFOs may not be adding staff just yet, they are just as consistent about seeing growth over the coming year. And growth is very likely to mean jobs. The more positions that open up, the more likely that unsettled employees will look to companies like Robert Half to move them to a better job.
Standing Alone
The best news is that Robert Half stands alone in its field. As an international company providing specialization in the accounting and finance field, they don’t have a lot of serious competition. Australia’s Adecco is one of the other market leaders in recruiting and placement, but they deal in smaller numbers as well as offer a wider swath of employee types. Their specialization is more in temporary workers and jobs, rather than finding the right long term match.
Adecco’s stock price dropped last July, too, but hasn’t had the same recovery that Robert Half experienced at the start of this year. Another potential competitor, Manpower Group (NYSE: MAN) has had similar stock inconsistency. They watched things fall in late 2011 and still have not recovered completely. Manpower looks to do well this coming year, too, but certainly not at the expense of Robert Half.
Putting People Back to Work
Robert Half is poised to take full advantage of the improvements that businesses in almost every sector are expecting. Everyone has a finance or an accounting department, and right now so many highly skilled employees are out of work that Robert Half may be able to make the most of an unfortunate situation. As things get better in the economy overall, things will get better for Robert Half.
Making the mistakes they’ve made in top and bottom line projections last quarter only makes this a better time to buy. Stock price is not as low as it could go, but it is likely to rise past the current $29 per share price to at least $32 per share in the next quarter or two. Just remember, if things look bad over the summer hang on tight, that always happens and you will be better off again within a few months.
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