Insperity (NSP) Benefits From Higher Worksite Employee Growth

Shares of Insperity Inc. (NYSE:NSP) have gained more than 96.2% in the past year, outperforming the 3.6% rise of the industry it belongs to.

Recently, the company reported strong fourth-quarter 2018 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings per share of 69 cents beat the consensus mark by 4 cents and increased 25.5% year over year. Total revenues of $966.8 million beat the consensus estimate by $3 million and increased 16.9% year over year.

Insperity has an impressive earnings surprise history, having outpaced estimates in each of the last four quarters. It delivered average four-quarter positive earnings surprise of 15.1%. Over the past 60 days, the Zacks Consensus Estimate for first-quarter 2019 earnings has been revised 16% upward.

What’s Driving Insperity?

Strong Staffing Market

The staffing industry is benefiting from a strong economy, leading to robust manufacturing and non-manufacturing activities, and higher corporate spending post the tax reform. So, there is plenty of room for growth in the United States in the near to mid-term as the demand environment remains strong. While the economy continues to create new jobs despite a record low jobless rate, a tight labor market is compelling companies to pay higher to attract and retain employees.

Worksite Employee Growth

Insperity’s top line benefits from rise in average number of worksite employees paid per month. Notably, the company’s revenues of $3.83 billion in 2018 (up 16% year over year) benefited from a 14.5% increase in average number of worksite employees paid per month and 1.4% increase in revenues per worksite employee per month. Average number of worksite employees paid per month was 209,123 and revenues per worksite employee per month were $1,526 in 2018.

Worksite employee growth can be attributed to strong sales, higher client retention and rise in net hiring of worksite employees by the company’s client base.

Shareholder-Friendly Moves

We are also impressed by Insperity’s efforts to reward its shareholders. In 2018, Insperity repurchased almost 1,198,000 shares for $113.3 million and paid dividends totaling $33.4 million. In 2017 and 2016, the company paid dividends of $65.8 million (inclusive of a special cash dividend of $41.7 million paid in fourth-quarter 2017) and $20.6 million, respectively. The company repurchased shares worth $38.7 million in 2017 and $31.7 million in 2016. Such moves indicate Insperity’s commitment to create value for shareholders and underline its confidence in its business.

Zacks Rank & Other Stocks to Consider

Currently, Insperity sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Some other top-ranked stocks in the broader Zacks Business Services sector are Omnicom (NYSE:OMC) , Robert Half (NYSE:RHI) and Automatic Data Processing (NASDAQ:ADP) , all carrying a Zacks Rank #2 (Buy). Long-term expected EPS (three to five years) growth rate for Omnicom, Robert Half and Automatic Data Processing is 6.9%, 8.4% and 12.8%, respectively.

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