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# Robert Half International Inc. (NYSE:RHI) Earns Among The Best Returns In Its Industry

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Today we are going to look at Robert Half International Inc. (NYSE:RHI) to see whether it might be an attractive investment prospect. Specifically, we’re going to calculate its Return On Capital Employed (ROCE), in the hopes of getting some insight into the business.

Firstly, we’ll go over how we calculate ROCE. Next, we’ll compare it to others in its industry. Last but not least, we’ll look at what impact its current liabilities have on its ROCE.

### What is Return On Capital Employed (ROCE)?

ROCE measures the amount of pre-tax profits a company can generate from the capital employed in its business. All else being equal, a better business will have a higher ROCE. Ultimately, it is a useful but imperfect metric. Renowned investment researcher Michael Mauboussin has suggested that a high ROCE can indicate that ‘one dollar invested in the company generates value of more than one dollar’.

### How Do You Calculate Return On Capital Employed?

Analysts use this formula to calculate return on capital employed:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)

Or for Robert Half International:

0.46 = US\$599m ÷ (US\$2.2b – US\$901m) (Based on the trailing twelve months to March 2019.)

Therefore, Robert Half International has an ROCE of 46%.

### Is Robert Half International’s ROCE Good?

ROCE is commonly used for comparing the performance of similar businesses. In our analysis, Robert Half International’s ROCE is meaningfully higher than the 11% average in the Professional Services industry. We would consider this a positive, as it suggests it is using capital more effectively than other similar companies. Regardless of the industry comparison, in absolute terms, Robert Half International’s ROCE currently appears to be excellent.

It is important to remember that ROCE shows past performance, and is not necessarily predictive. Companies in cyclical industries can be difficult to understand using ROCE, as returns typically look high during boom times, and low during busts. This is because ROCE only looks at one year, instead of considering returns across a whole cycle. What happens in the future is pretty important for investors, so we have prepared a free report on analyst forecasts for Robert Half International.

### What Are Current Liabilities, And How Do They Affect Robert Half International’s ROCE?

Current liabilities are short term bills and invoices that need to be paid in 12 months or less. Due to the way the ROCE equation works, having large bills due in the near term can make it look as though a company has less capital employed, and thus a higher ROCE than usual. To check the impact of this, we calculate if a company has high current liabilities relative to its total assets.

Robert Half International has total assets of US\$2.2b and current liabilities of US\$901m. As a result, its current liabilities are equal to approximately 41% of its total assets. A medium level of current liabilities boosts Robert Half International’s ROCE somewhat.

### The Bottom Line On Robert Half International’s ROCE

Despite this, it reports a high ROCE, and may be worth investigating further. There might be better investments than Robert Half International out there, but you will have to work hard to find them . These promising businesses with rapidly growing earnings might be right up your alley.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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 editorial-team@simplywallst.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.