The job outlook and employment in general says a lot about the economy. For quite some time after the financial crisis, the employment situation was grim. Since then, people think that full time employment has been improving because the unemployment rate is falling.
Alas, that doesn’t take into account the Labor Force Participation Rate, which shows some 5 million people have given up looking for work and aren’t included in the pool of people looking for jobs.
When we hear that so many jobs were added in a given month, most people also forget to ask how many jobs were full time and how many were part time, or temp staffing. The latter is of particular interest to Robert Half International Inc. (NYSE:RHI), which has 400 offices in 20 countries dedicated to providing temp staffing in the finance, accounting, legal, technology and management resources arenas.
Although RHI took a big hit in 2009 and 2010 because of the financial crisis, it quickly came back to life in 2011. The “new part-time economy” is driving growth as well, as businesses reluctant to take the plunge on full-time hires instead chose part timers in case things turned south again.
RHI Revenues Grow Like Wildfire
Specifically, if you’re wondering about the job outlook for your area of expertise, RHI saw adjusted revenue growth in every segment, with year-over-year growth rates of no less than 9.6% (accounting) to 20.9% in its Protiviti subsidiary, which handles broad management consulting. Other increases included 14.1% growth in management resources and 12.6% in office teams.
The U.S., by the way, has proven to be much stronger than international (16% revenue growth vs. 2%).
Q4 earnings came in strong for RHI, indicating that the part-time market in specialty staffing is alive and well. For Q4, net income was $84 million, up 25% from $67 million the year before. That translated to 62 cents per share, on revenues of $1.22 billion, which was up from 49 cents per share on $1.08 billion in Q4 2013.
The FY14 results were just as impressive. Full-year net income was $306 million or $2.26 per share versus net income of $252 million or $1.83 per share. Income increased 21% year-over-year, on an 11% revenue increase to $4.7 billion.
How many other businesses would love to have these numbers? RHI now has 19 consecutive quarters of double-digit increases in net income and PS. Oh, yeah, and net margins also increased from about 10% to about 12%.
The balance sheet should make anyone cry tears fo joy — $287 million in cash and $1.2 million in debt.
RHI was the first, and it appears to remain the best in class. Analysts estimate 13% EPS growth next year and 16% annualized for the next five years. Backing out the $2 per share in net cash, RHI trades at almost 20 times FY15 estimates.
That’s still a bit pricey for a 15% growth rate, even affording RHI a premium for its brand name, balance sheet and cash flow.
RHI stock roughly correlates with the S&P 500, and looking at this chart, maybe you wait it out and see if you can get shares in the low-50’s, or maybe sell some naked puts.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance. As of this writing, he did not hold a position in any of the aforementioned securities. He has 20 years’ experience in the stock market, and has written more than 1,200 articles on investing. He is the Manager of the forthcoming Liberty Portfolio. He can be reached at TheLibertyPortfolio@gmail.com.