Insperity, Inc. (NSP): A Bull Case Theory

We came across a bullish thesis on Insperity, Inc. on Valueinvestorsclub.com by Supernova. In this article, we will summarize the bulls’ thesis on NSP. Insperity, Inc.'s share was trading at $34.63 as of December 2nd. NSP’s trailing and forward P/E were 73.58 and 10.91 respectively according to Yahoo Finance.

Insperity (NSP) is a leading provider of HR outsourcing solutions for small and medium-sized businesses, offering payroll, benefits administration, and a full suite of HR services through its Professional Employer Organization (PEO) model. By becoming the co-employer for client workforces, NSP enables businesses to reduce costs, mitigate risk, and attract talent with high-quality benefits while retaining operational control.

The company has a 20-year track record of extraordinary organic growth, expanding sales and EPS at 12% and 21% annually, respectively, with minimal tangible equity and a net cash balance sheet. Free cash flow consistently exceeds net income, and all excess capital is returned to shareholders, resulting in high ROIC and ROE. NSP serves over 309,000 client employees (WSEEs) across diverse industries, leveraging scale for cost advantages and maintaining strong client stickiness through high-touch service.

Recent earnings have been depressed by temporary headwinds, including costs related to the new Workday partnership, elevated healthcare expenses, and slower SMB hiring. Adjusting for these factors, NSP trades at roughly 10x normalized earnings versus a historical median of 29x, creating a compelling entry point.

The Workday partnership is expected to be transformative, improving client retention, enabling sales to larger mid-market clients, and modernizing NSP’s technology offering, with potential margin and growth upside. Long-term, the PEO industry is underpenetrated and expected to grow roughly twice nominal GDP, giving NSP a runway for continued organic expansion.

With durable moats from switching costs, scale, and service quality, NSP’s business is highly resilient. While competitors and regulatory risks exist, the combination of normalized earnings power, potential upside from the Workday partnership, and strategic optionality creates a favorable risk/reward profile. NSP’s high cash generation, strong client relationships, and disciplined management incentives further support an attractive investment case, with potential for substantial long-term value creation.

Previously we covered a bullish thesis on Automatic Data Processing, Inc. (ADP) by David in November 2024, which highlighted the company’s leadership in workforce management, payroll services, and float generation funding share repurchases. The company's stock price has depreciated approximately by 15.58% since our coverage. The thesis still stands as ADP remains resilient. Supernova shares a similar perspective but emphasizes Insperity’s high-touch PEO model, organic growth, and Workday partnership potential.

Insperity, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held NSP at the end of the second quarter which was 25 in the previous quarter. While we acknowledge the potential of NSP as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.