5/30/24 - $rhi - detailed thinking: i'd remain greedier to buy.5/30/24 - vrockstar - NYSE:RHI - doing a follow up comment here given the stock now at 52wk lows and was flagged to me by a friend to take a look.
1) my valuation comments vs. the 4/25/24 comment don't change much. you're looking at a situation where it's a matter of where bottom EPS is and what lift off is from there. $3 of EPS seems low to me this yr, but is 3.5$ the trough? do we go to $4 or is it more like $4.5 next year. this matters - BUT - the problem is we don't have ANY visibility toward this and the macro holds all the cards, mgmt is simply steering the ship. so what multiple do you put on a scale but still-haven't-hit-cycle-bottom HIRING business? i'd posit 15x on $4 of EPS power remains generous, that's $60.
2) BUT we're in an environment that is being particular brutal to anything that's not mega-scaled-ai-will-eat-your-brains tech. and unfortunately even with net cash for RHI (that's a good factor), it's one of the marginal losers if we still get higher rates for longer, unemployment curve has JUST started to inflect. so the stock is anticipating this already - it's not as if this px correction hasn't happened at all.
3) looking back in history, you'd want to own this business anticipating the anticipation of the peak of unemployment. i'd argue that since we just started inflecting that UNLESS we get some sort of obvious pivot with gusto immediately (let's see what the jobs report brings next week - this could be a trading catalyst for a name like RHI), we can't even approximate what's going to happen.
4) vs. the SPY (do RHI/SPY) in trading view, we're at the most oversold readings in history. arguably the company remains on solid balance sheet footing, but it faces the above challenges AND consider the type of roles it helps hire for are becoming more and more consolidated into AI-at-risk-replacements in the coming cycle. while i'd argue it will take wall street a while to figure this out, i don't think RHI is a 10Y compounder. we play this just one more cycle.
5) i've set a greedy target to own this in the low GETTEX:50S , but have a flag set to begin a 50 bps starter position at ~$55. I still don't want to buy it today given my oppty set, $60 still seems like a compromise per the above (and considering if we get there - we also probably have a bunch of other companies on my short list I prefer). So bc it's not a "must own" name for me, my thinking on compounded for a long-term being low conviction - i need a good entry.
GL to the holders. lmk if you think differently. hope this helps frame thinking as we enter the balance of the year on this name.
-V