Robert Half’s stock price has taken a beating over the past six months, shedding 41.7% of its value and falling to $43.23 per share. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is there a buying opportunity in Robert Half, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Do We Think Robert Half Will Underperform?
Even with the cheaper entry price, we're cautious about Robert Half. Here are three reasons why RHI doesn't excite us and a stock we'd rather own.
1. Revenue Spiraling Downwards
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Robert Half’s demand was weak and its revenue declined by 1.5% per year. This wasn’t a great result and is a sign of poor business quality. 
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Robert Half, its EPS declined by 11.9% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Robert Half’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
We see the value of companies helping their customers, but in the case of Robert Half, we’re out. After the recent drawdown, the stock trades at 16.1× forward P/E (or $43.23 per share). This valuation tells us a lot of optimism is priced in - you can find better investment opportunities elsewhere. Let us point you toward our favorite semiconductor picks and shovels play.
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