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Company Overview

Robert Half International Inc. (NYSE:RHI) operates in the services sector and is a provider of staffing services in North America, South America, Europe, Asia, and Australia through its multiple divisions. The company has roughly 12,000 full time employees.

Current State

Financials
Market Cap4.921B
Profit Margin5.28%
Return on Assets (Trailing Twelve Months)17.20%
Return on Equity (Trailing Twelve Months)26.04%
Revenue Per Share (Trailing Twelve Months)29.92
Quarterly Revenue Growth (Year Over Year)0.80%
Quarterly Earnings Growth (Year Over Year)15.60%
Book Value Per Share (Most Recent Quarter)6.22
Forward Annual Dividend Yield1.80%
Payout Ratio39.00%

The company's stock is currently trading at $36.99, up 16.25% on the year. Today, the company beat 2nd quarter estimates of $0.43 per share by posting earnings of $0.46 earnings per share. All the analyst ratings I have seen have RHI as a buy or a hold, with none of them rating it as a sell.

With the earnings release today, it seems like now would be a great time to buy this stock. But if history is any indication, it might be better to wait before purchasing this stock.

Historical Perspective

I was looking at some of the stocks on my watch list today and RHI's performance caught my attention. I added this company to my watch list on 10/27/2008 and since then it has increased in value by 131.91%. While that increase is definitely impressive, it wasn't the increase that caught my attention. It was the way in which the increase was achieved.

Looking at RHI's stock performance over the past three years reminded me of the maple tree in my back yard. Just like any other maple tree, the one in my back yard is deciduous, which means that every autumn I can count on a blanket of leaves covering my lawn. The leaves fall off every year, sometimes it starts in late August, sometimes not until October, but they eventually always fall off completely before the end of the year.

The general definition of deciduous means the dropping of a part that is no longer or needed, or falling away after its purpose is finished. And while this definition easily applies to my maple tree, it seems that over the past several years it could be applied to RHI's stock price as well.

The Past Three Years

Let's take a look at the stock price movement of RHI in 2010, 2011, and 2012.

(click to enlarge)RHI Stock Price 2010-2012

Looking at these three charts, you can see that in each year there was a considerable drop in price that occurred in the 3rd or 4th quarter. Also in each year, the price went up considerably after that drop.

In 2010, the stock hit its lowest point on 8/24, closing at $21.57 compared to its $27.12 closing price on January 1st. RHI closed the year at $30.60 (up $9.03 compared to its low price point in August).

In 2011, the stock hit its lowest point on 9/22, closing at $20.06 compared to its $30.96 closing price on January 1st. RHI closed the year at $28.46 (up $8.40 compared to its low price point in September).

In 2012, the stock hit its lowest point on 10/12, closing at $25.24 compared to its $28.66 closing price on January 1st. RHI closed the year at $31.82 (up $6.58 compared to its low price point in October).

In each of these three years, the stock ended the year strong (only in 2011 was it not able to end on a higher note than it started the year at). But in each year, there was a significant difference between the price of the stock at the end of the year and the price of the stock at its low (in the months of August, September, and October).

The Current Year

Now, let's take a look at RHI's stock price movement over the course of this year.

Looking at the chart, you can see that RHI started the year at $32.56 and dropped as low as $31.33 on 5/2. It is currently trading at $36.83, which is very close to its high for the year of $37.53.

If history repeats itself, RHI should close the year above its current value, but at some point between now and then will fall below its previous low of this year ($31.33). In 2010, the dip happened in August. In 2011, it happened in September. In 2012, it happened in October. What month will it happen this year?

Conclusion

Timing the market and/or timing the price of an individual stock is never an easy thing to do. Often there doesn't seem to be any specific rhyme or reason as to why a stock suddenly increases or decreases in price. I looked at the prior financials of RHI and couldn't find any concrete reason as to why the dips in price over the past three years occurred.

In 2011, RHI beat earnings estimates in each of the first three quarters, so why in September did the price dip so low? In 2012, RHI missed its 2nd quarter earnings estimate, but it wasn't until October that the price dipped.

The past is never a certain indication of future events, however, in this case, I feel confident that RHI stock will be available at some point in the next four months at a more attractive price (in the $30-$33 price range.) That is when I will be looking to add RHI to my portfolio.

Whether or not you want to wait for such a dip depends on two factors: 1) Are you confident that such a dip will occur? and 2) Why are you buying RHI? If you are buying RHI for the long term, then the possibility of a dip in price probably isn't much of an issue, but if you are buying RHI for a short-term investment, I am of the belief that a better buying opportunity will present itself in the coming months.

Source: Robert Half International: A Solid Buy, But Wait For A Dip