Shares of Insperity Inc. NSP have gained a massive 66.1% in the past year against 14.7% decline of the industry it belongs to.
Catalysts Behind the Upside
The staffing industry is currently benefiting from a strong economy, leading to robust manufacturing and non-manufacturing activities, and higher corporate spending post the tax reform. The labor market has been witnessing record low unemployment levels and strong job additions since the beginning of the year.
This seems to be working in favor of Insperity, which witnessed its professional employer organization (PEO) solutions revenues from the United States to grow 15.7% year over year in the first nine months of 2018. The company provides an array of human resources and business solutions through its PEO services, which include Workforce Optimization and Workforce Synchronization solutions.
Insperity’s top line is also benefiting from rise in average number of worksite employees paid per month. Notably, the company’s revenues of $2.86 billion in the first nine months of 2018 (up 15.7% year over year) benefited from a 13.6% increase in average number of worksite employees paid per month and 1.9% increase in revenues per worksite employee per month. Average number of worksite employees paid per month was 204,895 and revenues per worksite employee per month were $1,552 in the first nine months of 2018.
Worksite employee growth is being driven by strength across sales, higher client retention and rise in net hiring of worksite employees by the company’s client base.
Financially, Insperity is in good shape with $328.3 million cash on hand and debt-to-capitalization ratio of 40.7% as of Sep 30. This enables the company to enhance shareholders' value through consistent repurchases and dividends. In the first nine months of 2018, Insperity repurchased almost 212,000 shares for $16.2 million and paid dividends totaling $25.2 million.
Zacks Rank & Stocks to Consider
Insperity currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Zacks Business Services sector are Waste Connections WCN, Republic Services RSG and Navigant Consulting NCI, each carrying a Zacks Rank #2 (Buy). Long-term expected EPS (three to five years) growth rate for Waste Connections, Republic Services and Navigant is 10.7%, 11.7% and 13.5%, respectively.
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