There is very clear evidence thejob market is gaining
momentum. And the implications forstocks and theeconomy are huge.
The latest jobs report from the Bureau of Labor Statistics shows
the economy added 236,000 jobs in February. Not only was that
well ahead of expectations of 171,000, but it was also one of the
biggestgains in the past two years. It also helped push the
stubbornly highunemployment rate down to 7.7% from 7.9%.
The implications ofjobs growth are huge. It stimulates consumer
spending and increases government taxrevenue , which are powerful
forces to lift the economy. While strong job growthwill benefit
many companies, I've identified one that stands togain the most.
In fact, it's already happening.Shares are up nearly 21% in the
past three months whileanalysts continue to reviseearnings
estimates higher. Take a look at the chart below.
Thestock I am talking about is
Robert Half (
, a global leader in staffing and outsourcing services.
Although the company operates inmultiple professional
disciplines, it specializes in the tax,accounting and finance,
and technology fields. Robert Half has operations in North
America, South America, Europe, Asia and Australia, providing it
with strong geographicdiversification .
The company has already been gaining on growing momentum in the
jobsmarket , with shares up 21% in the past three months. But
looking forward, there are more than a few reasons why Robert
Half is in the perfect position to benefit from more jobs growth.
The first is a fundamental shift in how companies are structuring
labor resources. Employing workers full time is expensive, which
has many employers increasingly relying on temporary workers to
drivemargin strength. According to a study by CareerBuilder and
Economic Modeling Specialists, 40% of employers plan to hire
temporary and contract workers in 2013, up from 36% in 2012. That
fundamental shift in how companies source labor resources in a
huge tailwind for Robert Half.
Robert Half also has big growth potential in the massive and
highly profitable staffing services market for the information
) industry. Robert Half is already a leader in the tax,
accounting and financial services markets, providing a strong
source of recurring and new revenue. But the size of that market
is dwarfed by the IT staffing market. Robert Half is using its
presence as an established player in tax and accounting services
to secure contracts for information technology labor resources.
Robert Half is also benefiting from its emphasis on smaller firms
with 50-100 employees. Not only do these accounts tend to carry
higher margins due to their smaller scale, but management has
reported a biguptick in demand for staffing services from
companies within this demographic because of a desire to employ
less than 50 full-time employees to avoid expenses associated
with theAffordable Care Act that will go in effect in 2014 for
companies with more than 50 full-time employees.
Robert Half is also a shareholder-friendly company. It bought
back a total of $133 million in shares in 2012, or about 2% of
the company. In the past eight years, Robert Half has bought back
about 21% of the company through open market purchases. The
company also recently raised itsdividend by 7% to 16 cents a
share, lifting itsdividend yield to nearly 2%. That dividend will
cost about $89 million a year, but with netcash of $286 million
at the end of 2012 andfree cash flow of $240 million in the past
year, Robert Half has plenty of financial power to support
Risks to Consider:
Even though the long-term potential looks great, shares are
up 32% in the past six months. Someprofit taking as shares trade
at an all-time high could be a short-term headwind.
Action to Take -->
With the recent jobs report showing one of its biggest
gains in two years and pushing the unemployment rate to its
lowest level since 2008, the job market is showing clear signs of
a recovery. Robert Half is in position to benefit from the trend
as a leader in tax, accounting and financial staffing services,
its penetration into IT markets, strong financial profile and
shareholder-friendlydisposition . If Robert Half traded with its
average forward price-to-earnings (P/E ) ratio of 27 in the past
10 years, then shares would jump to $49, which is a 35% premium
from current levels.
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