Robert Walters rating fully deserved

As we pointed out last month, Robert Walters shares are not cheap. From low-single-digit price/earnings (P/E) multiples in 2008, the white-collar recruiter now trades at a record high, putting the shares on 24 times forward earnings. But recruitment is a highly cycle industry, and the good times are definitely here. Second-quarter net fee income (NFI) jumped by 15% in constant currency and the chief executive and eponymous founder of Robert Walters predicts full-year profit will beat consensus estimates.

NFI was up 19% in the UK during the three months to 30 June, with growth still strong across both London and the regions, led by the finance sector. Asia Pacific NFI rose 12% as Australia delivered a third consecutive quarter of growth. Newer, emerging markets like Vietnam, Korea, Indonesia, and Taiwan at least doubled NFI during the period, while Europe was up 16% thanks to Spain, Ireland and the Netherlands.

Robert Walters has employed an extra 84 staff this year to cope with demand and now sits on net cash of £14.8 million, up a tad on a year ago.

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"The group's continued strong trading performance, underpinned by our ongoing focus on consultant productivity enables us to continue to deliver operational gearing," said the chief ahead of half-year results on 30 July.

Investec Securities is pleasantly surprised by the numbers, and with management's increasingly optimistic outlook, robust underlying trading and improving consultant productivity. It's why the broker has upgraded pre-tax profit forecasts for 2015 by 4.6% to £22.3 million, which implies 2.5% growth year-on-year. Estimates for 2016 increase 4.1% to £25.6 million, and rise by 3.7% for the year after to £28.9 million.

The shares are worth 520p, says Investec. And, while the shares look fully valued on a simple P/E basis, "given the net fee income growth and the now well entrenched earnings momentum the shares are on an attractive PEG of 0.7," writes Panmure Gordon's Adrian Kearsey. 'Buy'.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.