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What Makes Robert Half a Better Stock Than ManpowerGroup?

Zacks Equity Research

The staffing industry has been growing roughly two times faster than the economy on average since the end of the Great Recession. A strong U.S. economy and Trump’s business-friendly moves have been benefiting manufacturing as well as non-manufacturing sectors, which, in turn, are aiding the industry with additional hiring and wage increase.

Staffing firms are shifting toward employee-friendly, technology-based recruiting techniques like social media, mobile technology, artificial intelligence and big data. Also, technologies like cloud and blockchain offer more storage and safety to HR data. These trends are keeping demand for staffing services in good shape.

Given these promising developments across the industry, we are today discussing two staffing stocks — Robert Half International Inc. RHI and ManpowerGroup Inc. MAN— with market capitalization of $6.7 billion and $5.5 billion, respectively.

As both the stocks carry a Zacks Rank #3 (Hold), we are using certain other parameters to give investors a better insight. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .

Price Performance

Shares of ManpowerGroup have gained 40.7% year to date against Robert Half’s decline of 1.7%. The industry has rallied 11.7% in the said time frame. So, ManpowerGroup clearly scores over Robert Half.

Earnings and Sales Projection

Earnings growth along with stock price gains is often an indication of a company’s strong prospects.

Robert Half’s 2019 earnings are projected to grow 10.3% year over year while that of ManpowerGroupare expected to decrease 12.4%.

Robert Half’s 2019 sales are projected to grow 4.8% year over year while that of ManpowerGroupare expected to decline 2.9%.  Therefore, Robert Half has an edge over ManpowerGroup here.

Net Margin

Net profit margin helps investors evaluate a company’s business model in terms of pricing policy, cost structure and operating efficiency, and shows how good it is at converting revenues into profits. Hence, a strong net profit margin is preferred by all classes of investors.

Robert Half’s TTM net margin of 7.6% is above ManpowerGroup’s 2.6% and the industry’s 3.9%.

Leverage Ratio

Both Robert Half and ManpowerGroup have a higher debt-to-equity ratio compared with the industry average of 0.25. But Robert Half, with a leverage ratio of 0.26, has an edge over ManpowerGroup with the same of 0.38.

Return on Equity (ROE)

ROE is a measure of a company’s efficiency in utilizing shareholder funds. ROE for the trailing 12 months for Robert Half and ManpowerGroup is 41% and 20.1%, respectively. Further, with industry’s average of 22.4%, Robert Half is more efficient in using shareholder funds.

Valuation

EV/EBITDA is a commonly used multiple for the staffing industry. We observe that ManpowerGroup’s trailing 12-month EV/EBITDA ratio of 6.84 is lower than Robert Half’s 10X and the industry’s 7.52X. So, Robert Half looks cheap compared with ManpowerGroup.

Conclusion

Our comparative analysis indicates that Robert Half is poised better than ManpowerGroup when considering net margin, ROE, leverage ratio and earnings and sales growth expectations. Also, Robert Half is trading cheap compared with ManpowerGroup. A faster share price rally year to date has led to a rich valuation for ManpowerGroup.

Stocks to Consider

A few better-ranked stocks in the broader Zacks Business Services sector are  WEX WEX and FLEETCOR Technologies FLT, each carrying a Zacks Rank #2 (Buy).

The long-term expected EPS (three to five years) growth rate for WEX and FLEETCOR is 15% and 16%, respectively.

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FleetCor Technologies, Inc. (FLT) : Free Stock Analysis Report

WEX Inc. (WEX) : Free Stock Analysis Report

ManpowerGroup Inc. (MAN) : Free Stock Analysis Report

Robert Half International Inc. (RHI) : Free Stock Analysis Report

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