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Josh Enomoto

Why Robert Half (RHI) Might Finally Make Good on Its Potential

At first glance, staffing services specialist Robert Half (RHI) seems too risky of a venture to consider. For one thing, the market performance is lackluster, falling conspicuously behind that of the benchmark S&P 500 index. Moreover, the labor market relative to the devastation of the COVID-19 pandemic has been robust, perhaps unusually so. Fundamentally, that poses pressure on RHI stock.

Nevertheless, the good times might not continue rolling forward. With rising signs that all might not be so well – particularly the recent softness in the major equity indices – RHI stock may finally have its time to shine. Cynically speaking, should desperation accelerate in the labor market amid mass layoffs, Robert Half’s core business of connecting job candidates to staffing and employment opportunities should blossom.

Initial Readings Don’t Bode Well for RHI Stock

To be fair, the potentially optimistic narrative for RHI stock hasn’t aligned well at all with its actual performance. As inflation skyrocketed in 2022, the logical deduction called for consumers to cut their spending. In so doing, businesses likewise looked to reduce expenses, which invariably means layoffs. Under this backdrop, Robert Half should see increased demand.

However, the pink slip distribution largely concentrated in the technology sector. As well, the labor market continued to print overall positive figures, with the unemployment rate largely stabilizing around 3.5%. So long as you didn’t narrow down your prospective opportunities to specific tech jobs within specific tech firms, anyone that wanted to find gainful employment eventually could.

Inherently, then, RHI stock lacked some relevance. Why bother rewarding a middleman entity when you can directly secure a position yourself? Nevertheless, the fortuitous circumstances that bolstered confidence among jobseekers might not be around indefinitely.

In particular, the latest earnings results from the top enterprises in the world weighed on investors. Increasingly, it appears that consumers are looking to cut back their spending, which doesn’t augur well for broader economic stability. Lately, the job cuts that have been announced don’t just focus on tech. In recent months, entertainment firms to fashion apparel retailers have axed employment positions.

What’s particularly problematic for the economy at large is Clorox (CLX). A consumer goods giant, Clorox manufactures necessities. Yet earlier this year, management announced a new round of layoffs will commence following an initial phase of cuts in September 2022.

In other words, desperation will almost surely rise. Therefore, RHI stock seems like an opportunistic wager.

Robert Half Can Go All the Way

A significant portion if not an outright majority of future Robert Half job-seeking clients will start a relationship with the company out of necessity. That’s normal – that’s just human nature. However, some workers might want to start a relationship with Robert Half now before the deluge of desperate worker bees comes storming in.

For one thing, several astute professionals probably see the writing on the wall. For example, back during the initial impact of the COVID-19 crisis, practically all companies that could accommodate it embraced the grand work-from-home experiment. Basically, remote operations kept businesses running while helping to ensure worker health and safety.

However, with fears of the SARS-CoV-2 virus fading away, upper management has begun to take a more suspicious view of remote work. Therefore, several enterprises both in the U.S. and abroad began mandating a return to the office. Those that refuse to return may find themselves in the unemployment line. And even those that do return might still suffer the axe due to broader market headwinds.

Additionally, a Gallup poll last year revealed that job unhappiness hit a staggering all-time high, per a CNBC report. Even without the threat of pink slips, many people are already incentivized to look for a new position. With the threat of pink slips, that motivation might accelerate for some folks.

Therefore, anyone seeking to make the jump should start networking and building relationships as soon as possible. On principle, this dynamic should bolster RHI stock.

An Underappreciated Opportunity

Before anyone loads the boat on RHI stock, prospective investors should note that it’s a risky move. According to the Barchart Technical Opinion indicator, Robert Half rates as a 72% sell. As well, RHI’s 60-month beta stands at 1.32, which indicates noticeably more volatility than the stock market.

However, Robert Half is also underappreciated in a good way. Financially, the company enjoys broader stability, as evidenced by its cash-to-debt ratio of 2.77, which ranks above 65.07% of enterprises listed in the business services industry. Also, its three-year revenue growth rate pings at 8.3%, above 66.12% of the competition.

Perhaps most attractive to contrarians is the value proposition. Currently, the market prices RHI at a trailing multiple of 11.91. As a discount to earnings, Robert Half ranks better than 64.88% of its peers. Given the cynically positive fundamental backdrop, RHI stock at least deserves some consideration.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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