Robert Half International (NYSE:RHI) Looks To Prolong Its Impressive Returns

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. That's why when we briefly looked at Robert Half International's (NYSE:RHI) ROCE trend, we were very happy with what we saw.

Return On Capital Employed (ROCE): What Is It?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Robert Half International:

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

0.48 = US$855m ÷ (US$2.9b - US$1.1b) (Based on the trailing twelve months to March 2023).

Therefore, Robert Half International has an ROCE of 48%. In absolute terms that's a great return and it's even better than the Professional Services industry average of 12%.

See our latest analysis for Robert Half International

In the above chart we have measured Robert Half International's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is Robert Half International's ROCE Trending?

In terms of Robert Half International's history of ROCE, it's quite impressive. The company has consistently earned 48% for the last five years, and the capital employed within the business has risen 56% in that time. Now considering ROCE is an attractive 48%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. If Robert Half International can keep this up, we'd be very optimistic about its future.

Our Take On Robert Half International's ROCE

Robert Half International has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. However, over the last five years, the stock has only delivered a 20% return to shareholders who held over that period. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.

While Robert Half International looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether RHI is currently trading for a fair price.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.