Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Robert Half International Inc. (NYSE:RHI), with a market cap of US$6.6b, often get neglected by retail investors. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. This article will examine RHI’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Don’t forget that this is a general and concentrated examination of Robert Half International’s financial health, so you should conduct further analysis into RHI here.
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RHI’s Debt (And Cash Flows)
RHI’s debt levels surged from US$795k to US$277m over the last 12 months , which accounts for long term debt. With this growth in debt, RHI’s cash and short-term investments stands at US$270m to keep the business going. Additionally, RHI has generated US$583m in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 210%, signalling that RHI’s current level of operating cash is high enough to cover debt.
Can RHI meet its short-term obligations with the cash in hand?
At the current liabilities level of US$901m, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.7x. The current ratio is the number you get when you divide current assets by current liabilities. Generally, for Professional Services companies, this is a reasonable ratio since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Does RHI face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 26%, RHI’s debt level may be seen as prudent. This range is considered safe as RHI is not taking on too much debt obligation, which may be constraining for future growth.
RHI’s debt level is appropriate for a company its size, and it is also able to generate sufficient cash flow coverage, meaning it has been able to put its debt in good use. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how RHI has been performing in the past. You should continue to research Robert Half International to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RHI’s future growth? Take a look at our free research report of analyst consensus for RHI’s outlook.
- Valuation: What is RHI worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether RHI is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.