Hello Friends! It is Sunday evening, and I am off to get some sleep in a minute...just checking the mail and had the good fortune to receive another note from Jason M. If you or anyone else has questions or would like to start a discussion on this blog, please write me at firstname.lastname@example.org In any case, Jason M. writes:
I just read the article on the CNBC website on job
growth and companies that make money helping other
companies hire workers. the article made a lot of
sense to me.
Anyhow on with the point. One of the stocks they
mentioned in the article was RHI. The charts looked
pretty decent on this stock. What do you think of it?
Also, how does News articles like this effect a stock?
Jason, I found the Jim Jubak article you referred to in the email. Jim is a very smart professional and I of course defer to his judgement. Some of the stocks he mentioned included Robert Half (RHI), Administaff (ASF), Labor Ready (LRW), Gevity HR (GVHR), and Manpower (MAN). Of these stocks, I have only posted Gevity HR on my blog on March 29, 2004.
But let me take a look at Robert Half (RHI) as well!
As you probably know, the first thing I like to do is to look at the latest quarterly earnings report. On April 22, 2004, Robert Half (RHI) reported 1st quarter 2004 earnings. Revenues rose nicely to $572.3 million from $473.2 million in the same quarter in 2003. In addition, earnings came in at $15.4 million or $.09/share vs a loss of $(3.4) million or $(.02)/share last year. This was a nice quarter for RHI. (so far so good!)
The next place for me to check a stock is Morningstar.com. On that website, I check under the "5-Yr Restated" financials. For RHI, this is located here. Now what I do, is not necessarily the only way to assess a stock, and my picks do NOT guarantee success nor do I claim to be better at stock picking than the next person. However, looking at the revenue picture long-term for RHI, we can see that the company peaked in 2000 at $2.7 billion and then dropped to a low of $1.9 billion in 2002. They have stayed at that level in 2003 with $2.0 billion in revenue. Personally, I like to see a steady increase in revenue over the last five years. Like I said, a turn-around may result in a large price appreciation, but that is more speculative than I prefer to be, and like to see STEADY growth year after year! So on this point, RHI doesn't make the cut.
What about earnings? Again RHI peaked at $1.00 in 2000, and dropped all the way to $.01/share in 2002, improved to $.04/share in 2003, but still is way BELOW peak earnings levels.
The company IS generating a nice level of free cash flow and has a beautiful (!) balance sheet, which per Morningstar.com, shows $376.5 million in cash and $322.1 million in other current assets vs. a moderate $188.9 million in current liabilities and $2.3 million in long-term debt. THESE numbers look great!
So again, RHI might be a GREAT investment at this time, especially if it is turning itself around and becoming more profitable. However, it is just NOT my style...so I am unable to endorse it. That does NOT mean you shouldn't buy any, it just means it doesn't fit into our criteria for picking stocks.
Indeed the "Point & Figure" chart on RHI looks nice as well!
Certainly, good media coverage DOES help propel a stock upward. I do not think that just a plug in a story is enough to continue the price move. I believe strongly that good fundamentals underlying the stock price are what determines the long-term price action of any company.
Thanks again for stopping by! If you have any additional questions, comments, or words of encouragement, please feel free to email me at email@example.com