Insperity, Inc. (NSP) in Kingwood, Tex., delivers human resources (HR) and business solutions to improve business performance for small- and medium-sized businesses. The company's worksite employee growth continued to accelerate, increasing 12.4% in its last reported quarter.
The stock has gained 9.3% in price over the past year to close yesterday's trading session at $88.99. In addition, the stock is currently trading 31.2% below its 52-week high of $129.32, which it hit on Nov. 01, 2021.
The company's chairman and chief executive officer, Paul J. Sarvadi, said, "Insperity is poised to capitalize on increased awareness and demand for our premium HR services, [which] when combined with outstanding sales and service execution, positions us for an excellent start to our new five-year plan." Moreover, NSP stock has a 12-month median price target of $99, indicating an 11.3% potential upside.
Here is what could shape NSP's performance in the near term:
Positive Developments
Last month, NSP announced the extension of its 20-year partnership with UnitedHealthcare, a UnitedHealth Group (UNH) company, for medical and dental coverage. The contract extension, which includes medical and dental coverage through 2026, will use UnitedHealthcare's industry-leading provider networks and clinical care programs to provide premium health care benefits to Insperity's worksite employees, while increasing plan participation supporting national expansion.
Robust Financials
During the fourth quarter, ended Dec. 31, 2021, NSP's revenue increased 22.2% year-over-year to $1.29 billion. Its operating income increased 90.4% year-over-year to $14.68 million. And the company's net income grew 126.6% from its year-ago value to $9.71 million, while its EPS grew 127.3% from the prior-year quarter to $0.25.
Impressive Growth Prospects
The Street expects NSP's revenues and EPS to rise 17.8% and 11.9%, respectively, year-over-year to $5.86 billion and $4.42 in its fiscal 2022. In addition, NSP's EPS is expected to rise at a 15% CAGR over the next five years. Furthermore, the company has an impressive earnings surprise history; it topped Street EPS estimates in three of the trailing four quarters.
POWR Ratings Reflect Solid Prospects
NSP has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. NSP has a B grade for Quality. MU's solid earnings and revenue growth potential are consistent with the Quality grade.
Among the 43 stocks in the B-rated Outsourcing – Business Services industry, NSP is ranked #9.
Beyond what I stated above, we have graded NSP for Growth, Value, Sentiment, Stability, and Momentum. Get all NSP ratings here.
Bottom Line
NSP has exhibited robust financial performance in its last reported quarter and is on track to deliver solid growth in the coming months based on its improved sales efficiency and high level of client retention. In addition, given the analysts' price targets and the company's fundamental strength, the stock could potentially witness significant upside in the coming months. So, we think the stock could be a great bet now.
Note that ARC is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
How Does Insperity Inc. (NSP) Stack Up Against its Peers?
NSP has an overall POWR Rating of B, which equates to a Buy rating. Check out these other stocks within the Outsourcing – Business Services industry with A (Strong Buy) ratings: ARC Document Solutions Inc. (ARC), Civeo Corporation (CVEO), and TriNet Group Inc. (TNET).
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NSP shares were unchanged in premarket trading Wednesday. Year-to-date, NSP has declined -24.65%, versus a -9.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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