Robert Half International Inc (NYSE:RHI) shareholders, and potential investors, need to understand how much cash the business makes from its core operational activities, as well as how much is invested back into the business. What is left after investment, determines the value of the stock since this cash flow technically belongs to investors of the company. I’ve analysed below, the health and outlook of Robert Half International’s cash flow, which will help you understand the stock from a cash standpoint. Cash is an important concept to grasp as an investor, as it directly impacts the value of your shares and the future growth potential of your portfolio.
Is Robert Half International generating enough cash?
Robert Half International generates cash through its day-to-day business, which needs to be reinvested into the company in order for it to continue operating. What remains after this expenditure, is known as its free cash flow, or FCF, for short.
I will be analysing Robert Half International’s FCF by looking at its FCF yield and its operating cash flow growth. The yield will tell us whether the stock is generating enough cash to compensate for the risk investors take on by holding a single stock, which I will compare to the market index. The growth will proxy for sustainability levels of this cash generation.
Free Cash Flow = Operating Cash Flows – Net Capital Expenditure
Free Cash Flow Yield = Free Cash Flow / Enterprise Value
where Enterprise Value = Market Capitalisation + Net Debt
Although, Robert Half International generate sufficient cash from its operational activities, its FCF yield of 5.11% is roughly in-line with the broader market’s high single-digit yield. This means investors are being compensated at the same level as they would be if they just held the well-diversified market index.
Is Robert Half International’s yield sustainable?Can Robert Half International improve its operating cash production in the future? Let’s take a quick look at the cash flow trend the company is expected to deliver over time. Over the next two years, Robert Half International’s operating cash flows is expected to grow by a double-digit 16%, which is encouraging, should capital expenditure levels maintain at an appropriate level. Below is a table of Robert Half International’s operating cash flow in the past year, as well as the anticipated level going forward.
|Current||+1 year||+2 year|
|Operating Cash Flow (OCF)||US$514m||US$550m||US$598m|
|OCF Growth Year-On-Year||7.0%||8.8%|
|OCF Growth From Current Year||16%|
Robert Half International is compensating investors at a cash yield similar to the wider market portfolio. However, if you factor in the higher risk of holding just Robert Half International compared to the well-diversified market index, the stock doesn’t seem as appealing. Keep in mind that cash is only one aspect of investment analysis and there are other important fundamentals to assess. You should continue to research Robert Half International to get a better picture of the company by looking at:
- 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.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Robert Half International’s board and the CEO’s back ground.
- Other High-Performing Stocks: If you believe you should cushion your portfolio with something less risky, scroll through our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.