Getting In Cheap On Robert Half Inc. (NYSE:RHI) Might Be Difficult

When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 18x, you may consider Robert Half Inc. (NYSE:RHI) as a stock to potentially avoid with its 22.5x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

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While the market has experienced earnings growth lately, Robert Half's earnings have gone into reverse gear, which is not great. One possibility is that the P/E is high because investors think this poor earnings performance will turn the corner. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Robert Half

Keen to find out how analysts think Robert Half's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Robert Half's Growth Trending?

Robert Half's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 42%. As a result, earnings from three years ago have also fallen 72% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 20% per year during the coming three years according to the nine analysts following the company. With the market only predicted to deliver 11% each year, the company is positioned for a stronger earnings result.

With this information, we can see why Robert Half is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Robert Half maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 1 warning sign for Robert Half that you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.