A prudent investment decision involves buying well-performing stocks at the right time while selling those that are at risk. A rise in share price and strong fundamentals signal a stock’s bullish run.
Insperity, Inc. NSP has performed well in the past six months and has the potential to sustain the momentum in the near term. Consequently, if you haven’t taken advantage of its share price appreciation yet, it’s time you add the stock to your portfolio.
What Makes it an Attractive Pick?
An Outperformer: A glimpse at the company’s price trend reveals that the staffing services stock has had an impressive run on the bourse in the past six months. Shares of Insperity have returned 62.1%, which compares favorably with the industry‘s rise of 2.3%, in the past six months.
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Solid Zacks Rank: Insperity currently sports a Zacks Rank #1 (Strong Buy). Our research shows that stocks with a Zacks Rank #1 or 2 (Buy) offer attractive investment opportunities for investors. Thus, the company appears to be a compelling investment proposition at the moment.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Northward Estimate Revisions: The direction of estimate revisions serves as an important pointer when it comes to the price of a stock. Over the last 60 days, the Zacks Consensus Estimate for current quarter earnings increased 15.4%. Estimates for 2018 and 2019 moved up 12.2% and 10.6%, respectively, over the same time frame.
Positive Earnings Surprise History: Insperity has an impressive earning surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in all the previous four quarters, delivering an average positive earnings surprise of 20%.
Strong Growth Prospects: The Zacks Consensus Estimate for current quarter earnings is pegged at 60 cents, indicating year-over-year growth of 46.3%. Moreover, earnings are expected to register 39.2% and 13.4% growth, respectively, in 2018 and 2019. The stock has long-term expected earnings per share growth rate of 18%.
Growth Factors: Insperity looks strong on the back of a booming professional employer organization (“PEO”) industry. It is an integrated human resources and business solutions provider. The company offers a comprehensive suite of HR services solutions through its PEO services known as Workforce Optimization and Workforce Synchronization solutions. With the help of these solutions, Insperity serves small and medium-sized businesses in selected markets throughout the United States. In first-quarter 2018, Insperity’s PEO solutions revenues from the United States grew 14.9% year over year.
Apart from its PEO services, Insperity is also focusing on its Workforce Administration solution, which provides human capital management and payroll services solution. By having Workforce Administration as the prime element of its next five-year plan, the company plans to offer the same as the most integrated traditional employment solution in the market. Insperity is highly optimistic about the growth opportunities arising from Workforce Administration and Workforce Optimization.
Improvement in client retention rates drives Insperity’s revenues. The company has been taking several initiatives in the form of designed solutions catering to the requirement of each of its client segments (small, emerging gross and mid-market clients). Additionally, launch of Insperity Premier, a HCM technology platform designed to facilitate the co-employment relationship, gained popularity among the company’s clients. All these efforts helped Insperity report strong client retention in the first-quarter 2018, wherein the company also enjoyed solid client renewal and new sales. In 2017 and 2016, the retention rates were 85% and 86%, respectively, better than its long-term average of 83%. The retention rate in 2015 was 84%.
Insperity’s growing cash position implies management’s efficient execution in recent times. In 2017, the company had cash and cash equivalents of $354.3 million, which compares favorably with $286 million and $269.5 million of cash and cash equivalents, respectively in 2016 and 2015. The significant amount of cash provides it the flexibility to pursue any growth strategy. The company’s strong cash flow generating abilities make it a value buy for investors.
Other Stocks to Consider
Some other top-ranked stocks in the broader Business Services sector include BG Staffing, Inc. BGSF, The Dun & Bradstreet Corporation DNB and FLEETCOR Technologies, Inc. FLT. While Dun & Bradstreet sports a Zacks Rank #1, BG Staffing and FLEETCOR carry a Zacks Rank #2.
The long-term expected earnings per share (three to five years) growth rate for BG Staffing, Dun & Bradstreet and FLEETCOR Technologies is 20%, 6% and 16.5%, respectively.
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