Robert Half International (RHI) is one of the world's largest providers of temporary staffing, project professionals, and permanent placement services to the finance and accounting industries. The company's solid results during 2007 are encouraging with all operating divisions except one (Protiviti) posting impressive double-digit growth. The management expects the growth momentum to continue in light of continued improvement in the U.S. labor market.
However, concerns remain about an economic slowdown negatively impacting staffing companies like Robert Half. The operating margin is contracting, primarily due to weak operations at Protiviti, which embarked on an aggressive global staff expansion program at the same time revenues came under pressure from reduced client demand for compliance-related employees. We maintain our Hold rating on the shares.
Robert Half is currently trading at 12.4 times trailing 12 month earnings. The company is quite cyclical with EPS dropping down to $0.01 in 2002, resulting in a 1,800 P/E ratio when the stock was most attractive. Therefore, the stock should be valued on a price-to-sales (net service revenues) basis.
Over the last five years, the company's stock traded in a P/S range of 1.05 to 2.62, with the stock dropping to 0.73 times net service revenues in the last few months. Robert Half currently trades at 0.77 times trailing 12 month net service revenues (sales). The target of $26.00 is based on a 0.85 P/S ratio on 12 month trailing net service revenues.
Read the full analyst report on RHI
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