Small and medium-sized businesses increasingly turn to outsourcing HR functions to streamline operations, with Insperity (NSP) being one of the leading providers.

The company offers comprehensive HR services, acting as an outsourced HR department, and pioneered the Professional Employer Organization (PEO) model.

Despite current economic challenges, Insperity’s strong financial performance and strategic initiatives, like the Workforce Acceleration Initiative, position it for continued growth.

However, the market underestimates its potential, as reflected in its below-average P/E ratio.

The company’s focus on technology and partnerships is expected to drive future expansion.

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More and more companies are looking for ways to streamline operations and focus on what they do best.

For many small and medium-sized businesses (SMBs), one of the most effective strategies is outsourcing human resources (HR) functions.

This allows companies to manage their workforce more efficiently without getting bogged down in the complexities of HR management.

And when it comes to outsourcing HR, one company that stands out is Insperity (NSP).

Insperity has been a go-to partner for businesses needing comprehensive HR services for decades.

From payroll processing to employee training, the company offers a wide range of solutions tailored to meet each client’s specific needs, essentially acting as an outsourced HR department.

Insperity pioneered the “professional employer organization” (PEO) model which assumes employer-of-record status and co-employment responsibilities for client companies.

This allows businesses to outsource non-core HR functions like benefits administration, payroll processing, regulatory compliance, and risk management.

Insperity has built a reputation for helping SMBs manage their HR tasks more effectively, allowing these businesses to focus on growth and productivity.

Despite the current economic challenges, Insperity’s management is optimistic about the future.

They expect hiring activity to pick up as the year progresses, which should drive growth in the company’s client base and revenue. Additionally, the market for human resource management is growing rapidly, with the forecast to reach $56.5 billion by 2030 with a CAGR of 12.7%.

This positive outlook is supported by Insperity’s strong financial performance with achieving 32% Uniform return on assets ”ROA” and 42% asset growth in 2023.

Furthermore, the company reported a 29% year-over-year increase in adjusted EBITDA and a 34% increase in adjusted EPS in its most recent earnings.

One of the key drivers behind these numbers is Insperity’s Workforce Acceleration Initiative. This program is designed to enhance sales effectiveness and improve client retention by integrating new technology into the sales process and offering more personalized services.

It has also fueled the company’s transition to a more recurring revenue model tied to software subscriptions in addition to traditional PEO fees.

However, the market doesn’t seem to appreciate the company’s potential fully. It currently trades at a Uniform P/E ratio of 21x, which is below the industry average.

By leveraging technology, Insperity helps businesses streamline their HR processes, reduce costs, and improve overall efficiency.

The company’s strategic focus on partnerships and technology innovation positions it well to capitalize on the ongoing demand for outsourced HR services.

As more businesses turn to Insperity for their HR needs, the company is likely to see continued growth in both its client base and revenue.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Strategist &
Director of Research
at Valens Research