Insperity Up 20.8% YTD: Will The Rally Continue Through '18?

Insperity, Inc.’s (NYSE:NSP) price performance has been impressive year to date. The stock has rallied 20.8% compared with the industry’s gain of 5.1%.

Given its strength in professional employer organization (PEO) industry and solid product portfolio along with low attrition rates, we believe that the stock has a decent upside potential.

Let’s see what the rest of the year holds in store for Insperity.

Ancillary Products Portfolio Continues to Expand

Insperity is strengthening its ancillary products portfolio, which is expected to become a key growth driver going ahead. These products allow the company to tap clients, who do not require its full PEO/Workforce Optimization solution, thus 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.

Insperity, Inc. Revenue (TTM)

PEO Industry Offers Room for Growth

The U.S. PEO industry remains largely untapped, leaving ample scope for growth. 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 solid growth driven by the increase in tenured business process automations (BPAs). Rising demand for its offerings, propelled by the Affordable Care Act (ACA) and some other similar bills, is another important driving factor which will allow it to expand the company’s client base.

Client Retention to Remain Strong

Insperity has made dedicated efforts to improve its client retention rates, which have proved conducive to company's growth and might continue to help realizing a sizeable recurring revenue base. In fact, 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%.

Zacks Rank & Other Stocks to Consider

Insperity has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks in the same space are Korn/Ferry International (NYSE:KFY) , GEE Group (NYSE:JOB) and ManpowerGroup (NYSE:MAN) .

In the trailing four quarters, Korn/Ferry, GEE Group and ManpowerGroup have delivered a positive earnings surprise of 8.1%, 6.3% and 2.7%, respectively.

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