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 - Free Report) is an integrated human resources and business solutions provider stock that has performed extremely well so far this year and has the potential to sustain the momentum in the near term. Consequently, if you haven’t taken advantage of the share price appreciation yet, it’s time you add the stock to your portfolio.
What Makes Insperity an Attractive Pick?
An Outperformer: A glimpse of the company’s price trend reveals that the stock has had an impressive run on the bourse on a year-over-year basis. Shares of Insperityhavereturned a massive 62.3%, which compared favorably with the S&P 500’s gain of 10.9%.
Solid Rank & VGM Score: Insperity currently carries a Zacks Rank #2 (Buy) and a Value Growth Momentum Score (VGM Score) of A. Our research shows that stocks with a VGM Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best 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 of earnings for the current quarter increased 9.6% to $1.14 per share. Estimates for 2018 increased 14.7% to $3.04 per share.
Positive Earnings Surprise History:Insperity has an impressive earnings surprise history. The company’s earnings have surpassed the Zacks Consensus Estimate in the previous four quarters, recording an average positive earnings surprise of 14.4%.
Strong Growth Prospects:The Zacks Consensus Estimate for 2018 earnings is currently pegged at $3.04, reflecting year-over-year growth of 24.1%. Moreover, earnings are expected to register 14.9% growth in 2019. The stock has long-term expected earnings per share growth rate of 18%.
Growth Factors: Lets delve deeper into the stock’s operations to have a better idea of its performances.
Optimistic PEO Industry
Insperity provides an array of human resources and business solutions. The company primarily offers this solution through its professional employer organization (“PEO”) services which includes Workforce Optimization and Workforce Synchronization solutions.
Consequently, it bodes well for the company especially as workforce synchronization continues to gain traction with mid-market clients. Furthermore, the company is likely to witness robust growth driven by the increase in tenured business process automations (BPAs). Increasing demand for its offerings propelled by the Affordable Care Act (“ACA”) and some other similar bills is another important driving factor which will allow the company to expand its client base.
In 2017, earnings were $2.45 per share, up 37% over 2016. Revenues of $3.30 billion increased 12.2% on a year-over-year basis. The top-line growth can be attributed to the increase in average number of worksite employees paid per month. Additionally, worksite employee retention was 85% in 2017.
Ancillary Products Portfolio
Insperity continues to strengthen its ancillary products portfolio, which could become a key growth driver going ahead. These products allow the company to tap the clients who do not require its full PEO/Workforce Optimization solution, consequently opening avenues for cross-selling later on.
The company has been strategically expanding such products and services. Not only does this benefit it in terms of revenue contribution but also in terms of profitability.
Strong Client Retention Rates
Insperity has taken dedicated efforts to improve its client retention rates, which have resulted in the creation of a sizeable recurring revenue base. The company has especially designed solutions catering to the requirement of each of its client segment (small, emerging gross and mid-market clients).
This in turn, has enabled it to adopt a targeted strategy for each segment to minimize client attrition. In 2017, client attrition rate was 15% compared with 14% in 2016. This boosted its client retention rate consistently over the past few quarters. 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%.
We also appreciate the company’s shareholder friendly moves. On Feb 22, the company’s board of directors approved a 33% hike in its quarterly cash dividend from 15 cents to 20 cents per share. The new payout was done on Mar 22, 2018 to all stockholders of record as of Mar 8, 2018.
Such moves indicate the company’s commitment to create value for shareholders as well as underlines its confidence in business growth.
One-Time Bonus from Tax Benefits
Based on the benefits from the new tax law (Tax Cuts and Jobs Act) on Feb 9, Insperity announced a one-time bonus to its employees.The bonus amount will vary from $1,000 to $4,000 per employee depending on the employee’s tenure with the company. Overall, the company is investing almost $9 million of tax reform savings on its employees.
The company is further optimistic about the tax reform policy which is expected to boost the both smaller business community as well as the broader U.S. economy.
Other Stocks to Consider
Other top-ranked stocks from the same spaceinclude GEE Group (JOB - Free Report) , Hays PLC. and Korn/Ferry International (KFY - Free Report) . While Korn/Ferry and GEE Group currently sport Zacks Rank #1, Hays PLC is a Zacks Rank #2 stock.
Sales for GEE Group, Kforce and Korn/Ferry are estimated to rise 118.1%, 3.4% and 11.9%, respectively, for the current quarter.
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