Robert Half International Inc. (RHI) – Behind the Numbers

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Today I would like to take a look at Robert Half International Inc. (NYSE:RHI) and provide some insight into the company’s numbers.

Robert Half provides staffing and risk consulting services in five continents throughout the world. Adding in the company’s 1.8% current dividend yield, the performance has roughly matched that of the S&P 500 for the previous 52 weeks.

Credit: Robert Half International Inc. (NYSE:RHI)

In its most recent 10-Q statement for the first quarter ending in March, there is one statistic that stands out: permanent placement staffing in the United States grew by 14.9% year-over-year. This has been its strongest area of growth over this time period.

Gross margin dollars for risk consulting and internal auditing permanent placement (revenue less reimbursable expenses) increased in the quarter ending on March 31, 2013 to $30 million compared to $24 million in the year ago period.  This displays the company’s efficiency in attaining the improved permanent placement revenue in the first quarter.  Further showing this is the fact that general and administrative expenses were flat when comparing these two periods.

Additionally, the company’s operating income was 8.7% of revenue for the quarter ending in March, compared to 7.9% of revenue in the year ago period.  The company also, as of March 31, has authorized a buyback of 10.6 million additional shares, in addition to the employee stock purchase options.

Robert Half International Inc. (NYSE:RHI) has a price to earnings ratio of 16.38, which is better than that of Paychex, Inc. (NASDAQ:PAYX).  Paychex has a price to earnings ratio of 22.06.

Robert Half has a 17.2% return on assets and an astonishing 26.04% return on equity. These are high levels for the ratios. Manpowergroup Inc (NYSE:MAN) has a 4.23% return on assets and a 7.15% return on equity.  This is another indication that the shares of Robert Half International Inc. (NYSE:RHI) represent a good value.

In the first quarter of 2013, gross margins increased compared to the same period a year ago for all three of its reportable segments.  While revenue did not grow in the same manner, this proves that the company is managing its costs well and making the most of current sales levels.  This gives me confidence that if the company hits its revenue growth targets, margins will be good as management is able to control costs.

Robert Half’s advantage

The direct placement managers of Robert Half International Inc. (NYSE:RHI) have extensive experience working in the financial services sector. This allows the managers not just to be salespeople, but also to identify what it is that employers are looking for in a candidate.

With the recruiting managers knowing first hand what kind of employee the employer is looking for, it makes things a lot easier. For example, when a candidate needs to have specific experience, say, in Quickbooks accounting software, the recruiting manager can say “yes I know what you are looking for,” in addition to already having worked in that capacity.

Credibility and efficiency

This expertise allows the employees of Robert Half International Inc. (NYSE:RHI) to easily gain a client’s confidence, as it is clear to the CEO or the CFO that the recruiting manager knows what type of employee they are looking to hire. It also allows the recruiting manager to be efficient in finding a potential match as he or she can weed out the resumes and candidates that are not a good fit for the company.

The competition

Looking through Yahoo! Finance to find listed competitors traded on the NYSE or the NASDAQ, I found two companies.

Paychex, Inc. (NASDAQ:PAYX) is a strong company in its own regard.  Accountants and companies rely on this company for payroll outsourcing services. Paychex will prepare payroll reports, payroll tax returns, retirement plan services, and more for a company and has competitive fees as it tries to stave off competition from smaller competitors who often times have a local focus.

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