mardi 30 août 2016

Robert Half International (RHI)

Let's talk about a stock nobody's talking about: Robert Half International. 

Sector : Provider of temporary and permanent staff , mostly in the fields of finance and accounting
Actual ROE : 35
Average ROE last 5 years : 29
Annual EPS growth last 5 years : 44%
Forward PE : 13
Lowest PE last 5 years : 17
Highest PE last 5 years : 27
Debt : None
Dividend : 2,5%
Buyback : About 9% of the float has been bought back since 2011

With these numbers, Robert Half International looks pretty interesting . Any business with such a high ROE, great long term EPS growth, low PE ratio and absence of debt seems like a business with a low risk and an interesting future. 
RHI had a massive contraction of the PE over the last year because of the slowing growth. Yeah, the growth has slowed, but it’s still there (about 6% growth in the last quarter, so it's not a momentum stock, but it's nevertheless and interesting stock). Today, you can buy this company at (robert) half the price of 2011 (on a PE basis). 

Can you match this joke about Robert Half? I was planning to do more jokes about "full position of that Half stock" but it turned too silly.
In the long run, the value creation of that business has been so-so: about 70% of appreciation over the last 5 years and about 25% over the last 10 years (dividends excluded). That’s the only point that looks bad to me. But it’s a bit like Home Capital Group , 5 years ago: EPS were growing and growing but the PE ratio was contracting and contracting. 

So, one of the best "high ROE/low PE/no debt/OK growth" in the stock market right now. 

7 commentaires:

  1. I fear more contraction of the p/e and more slowing of growth...until there is no more growth and then comes the decline in earnings. If all they could do was gain 70% during five amazing bull market years, I doubt they will gain half of that in the next five years.

    If you go ahead and buy this stock, you'll probably end up selling it to buy more Dollar Tree and Ross Stores. I bet they both do better than Robert Half in the next five years.

  2. That's my only concern with this business: the perfornance of the stock.

    As I wrote, it's mainly because of PE contraction instead of growth in earnings.

    But, if someone believes that the rear view mirror is important before investing, that stock is not the best idea you could find.

  3. I like your contrarian approach.

  4. What? I don't think my approach is contrarian at all.

  5. You are not contrarian. But you time your trades well. You prefer to buy after a good stock has been beat up and the price is lower (which is an intelligent approach).
    I'm a dummy. I buy with the crowd and on very good news. I bought Smith & Wesson (the gun guys) just before earnings. We knew earnings would be spectacular...and they were. Guidance was revised much higher...and the stock proceeded to lose 7% today (the day after earnings). People sell int the good news. They also believe that gun sales are cyclical and sales will go down later. Meanwhile, Smith & Wesson has $150 Million to buy out new companies (knives, hunting accessories, etc).

  6. SWHC and RGR are good stocks. Great ROE and great balance sheet.

    I'll probably buy one of them one day. But not more that 2 or 3% of my portfolio.

  7. I heard that Dollarama is growing SAME STORE sales by almost 6% per year. The other giants in that business cannot do even half that. If only that stock was not so expensive. It may be the first one to buy in a stock market correction.