Insperity Stock To $37?

Insperity (NSP) stock has fallen 18% during the past day, and is currently trading at $37.03. Our multi-factor assessment suggests that it may be time to sell NSP stock. We have, overall, a pessimistic view of the stock, and a price of $37 may not be out of reach. We believe there are several things to fear in NSP stock given its overall Weak operating performance and financial condition. This isn’t appropriately reflected in the stock’s Moderate valuation which is why we think it is Unattractive.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $1.4 Bil in market cap, Insperity provides HR and business solutions for small to medium businesses, including payroll, benefits, compliance, performance management, and training to enhance workforce optimization and synchronization.

[1] Valuation Looks Moderate

This table highlights how NSP is valued vs broader market. For more details see: NSP Valuation Ratios

[2] Growth Is Weak

• Insperity has seen its top line grow at an average rate of 6.8% over the last 3 years
• Its revenues have grown 2.4% from $6.5 Bil to $6.7 Bil in the last 12 months
• Also, its quarterly revenues grew 3.3% to $1.7 Bil in the most recent quarter from $1.6 Bil a year ago.

This table highlights how NSP is growing vs broader market. For more details see: NSP Revenue Comparison

[3] Profitability Appears Very Weak

• NSP last 12 month operating income was $47 Mil representing operating margin of 0.7%
• With cash flow margin of -0.8%, it generated nearly $-53 Mil in operating cash flow over this period
• For the same period, NSP generated nearly $40 Mil in net income, suggesting net margin of about 0.6%

This table highlights how NSP profitability vs broader market. For more details see: NSP Operating Income Comparison

[4] Financial Stability Looks Strong

• NSP Debt was $436 Mil at the end of the most recent quarter, while its current Market Cap is $1.4 Bil. This implies Debt-to-Equity Ratio of 30.8%
• NSP Cash (including cash equivalents) makes up $456 Mil of $2.0 Bil in total Assets. This yields a Cash-to-Assets Ratio of 22.6%

[5] Downturn Resilience Is Very Weak

NSP has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• NSP stock fell 34.0% from a high of $129.20 on 1 November 2021 to $85.31 on 7 March 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 21 April 2023
• Since then, the stock increased to a high of $129.74 on 23 April 2023 , and currently trades at $37.03

 
2020 Covid Pandemic

• NSP stock fell 72.2% from a high of $93.78 on 16 January 2020 to $26.11 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 11 March 2021

 
2008 Global Financial Crisis

• NSP stock fell 80.3% from a high of $35.29 on 4 April 2007 to $6.96 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 19 May 2016

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read NSP Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.