The Corporate Executive Board Company (CEB), Ecolab Inc. (ECL): Should We Expect Another Rally in This Space?

Ecolab Inc. (NYSE:ECL) remains a very high quality large-cap company that should be a core holding for growth investors. Ecolab, well-managed and diversified across several stable end-markets and geographies, has endured competitive advantages through its R&D focus and unique selling model and an enviable long-term track record of successful growth.

Another player in this space

Robert Half International Inc. (NYSE:RHI) remains the one of the slowest “runners” in this space with a 6% rise in market value in 2013. The company provides temporary and permanent staffing services. The stock is attractively priced at 2014 expected P/E and P/FCF multiples of 17.6x/15.3x, versus a historical average P/E of 23.5x during mid-cycle periods. The earnings are likely to compound at a low-to-mid teen or higher rate in the next two-to-three years, which should drive good share-price appreciation.

Robert Half International Inc. (NYSE:RHI) is in the middle of a multi-year profit expansion that should drive healthy share-price appreciation over the next few years. The stock has under-performed the market year-to-date due to somewhat weaker 1Q13 results and sluggish 2Q13 guidance. However, re-acceleration is expected in 2H 2013 and 2014, and the company is expected to generate solid growth in the current economic environment, with improvement likely if U.S. economic activity improves.

Final word

Business and professional services as an industry has been growing in terms of both revenue and margins in 2013. Despite double-digit increases in the stock price, there are still some investing gems hidden in the industry. The Corporate Executive Board Company (NYSE:CEB) is one of them, given its strong margins and cash flows. Ecolab Inc. (NYSE:ECL) and Robert Half are also recommended as buys on the basis of diversified product offerings and bottom-line expansion, respectively.

Zain Abbas has no position in any stocks mentioned. The Motley Fool recommends Robert Half International. Zain is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Should We Expect Another Rally in This Space? originally appeared on Fool.com and is written by Zain Abbas.

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