Insperity, Inc. NSP is currently benefiting from the expanding PEO market, strong SMB demand, robust portfolio, consistent shareholder returns and solid cash position.

Factors That Augur Well for NSP Stock

Per Straits’ Research, the global professional employer organization (PEO) market was valued at $66.23 billion in 2024 and is expected to grow from an estimated $73.58 billion in 2025 to $152.14 billion by 2033, registering a compound annual growth rate (CAGR) of 11.1%. This fast-growing industryis currently being driven by the proliferation of small and medium-sized businesses (SMBs), increased costs related to workers’ compensation insurance coverage, workplace safety programs, employee-related complaints and litigation, complex regulation of payroll, payroll tax and employment issues.

Insperity, a leader in PEO services, should benefit from this favorable trend. As more SMBs recognize the value of PEO services, Insperity stands to benefit from the expanding market. The company’s ability to address the unique challenges of SMBs, such as managing compliance and reducing HR costs, ensures sustained demand for its services.

With a robust portfolio that includes payroll, benefits administration, compliance support and employee training, NSP is well-positioned to capitalize on the growing demand for outsourced HR services. The company’s diverse service offerings give it a competitive edge. From providing health insurance solutions to performance management tools, the company’s broad range of tailored solutions creates cross-selling opportunities and meets evolving client needs, facilitating client retention and driving revenue growth even during economic downturns, such as during the COVID-19 pandemic.

NSP has demonstrated steady revenue growth over the years, reflecting its ability to attract and retain clients in a competitive market. NSP’s revenues have increased at a CAGR of 8.3% from 2019 to 2023. We expect revenue growth of 10.9% in 2024.

Insperity, Inc. Revenue (TTM)

Insperity, Inc. revenue-ttm | Insperity, Inc. Quote

A strong cash position ensures consistent returns to shareholders. During 2021, 2022 and 2023, the company repurchased shares worth $69.7 million, $69.7 million and $131.5 million, respectively. It paid dividends worth $144.2 million, $84.2 million and $77 million in 2021, 2022 and 2023, respectively.

The company’s cash and equivalents balance was $553 million at the end of the third quarter of 2024 against no current debt. NSP’s current ratio at the end of the third quarter of 2024 was pegged at 1.16, below the industry average of 1.46. A current ratio of more than 1 indicates that the company will easily pay off its short-term obligations. Therefore, shareholder returns may be expected to continue.

Some Risks for Insperity Stock

NSP is facing pressure on its operating income due to increasing investment in employees and technology aimed at enhancing client satisfaction and long-term growth. In 2023, total operating expenses increased 7.5% year over year. They rose 17.7% in 2022 and 5.7% yearly in 2021. Negative sentiment around operating income may lead to increased stock price volatility.

NSP faces geographic market concentration, with a significant portion of its revenue and client base concentrated in specific regions of the United States. New York, California and Texas accounted for nearly 10%, 15% and 18% of the company’s total market in 2023, making its performance sensitive to the economic conditions, labor markets and regulatory environments of these areas. Geographic concentration is often perceived by investors as a barrier to stable growth and resilience against regional economic fluctuations.

Zacks Rank and Stocks to Consider

Insperity currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector are ABM Industries ABM and Amadeus IT Group AMADY.

ABM Industries carries a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ABM has a long-term earnings growth expectation of 5.2%. It delivered a trailing four-quarter earnings surprise of 11.6%, on average.

Amadeus IT Group flaunts a Zacks Rank of 2 at present. It has a long-term earnings growth expectation of 9.4%.

AMADY delivered a trailing four-quarter earnings surprise of 7%, on average.

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