Insperity Inc. (NSP, Financial) recently recorded a daily gain of 14.8%, but its 3-month performance shows a loss of -6.16%. With an Earnings Per Share (EPS) of 4.75, the question arises: is the stock modestly undervalued? This article aims to provide a comprehensive valuation analysis of Insperity Inc. (NSP) to answer this question. Read on to find out more.
Company Introduction
Insperity Inc. is a leading provider of a wide range of human resources and business solutions aimed at improving business performance. The company primarily targets small and midsize enterprises. Most of its products are offered through its Workforce Optimization and Workforce Synchronization solutions. These solutions cover various human resource functions like payroll and employment administration, employee benefits and compensation, government compliance, performance management, training and development services, and human capital management. The company generates all of its revenue in the United States.
As of October 31, 2023, Insperity's stock price stands at $110.77, whereas the GF Value, an estimation of its fair value, is $129.84. This suggests that the stock may be modestly undervalued.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is derived from a unique method that considers historical multiples, an internal adjustment factor based on the company's past returns and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded.
Based on the GF Value, the stock of Insperity (NSP, Financial) is believed to be modestly undervalued. The stock's current price of $110.77 per share gives Insperity a market cap of $4.20 billion. This indicates that the stock is likely to offer higher long-term returns than its business growth, given its current undervaluation.
Link: These companies may deliever higher future returns at reduced risk.
Financial Strength
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Therefore, it is crucial to carefully review a company's financial strength before deciding to invest in its stock. Insperity's cash-to-debt ratio of 1.47 is better than 54.82% of the 1047 companies in the Business Services industry. This ratio, along with other factors, gives Insperity a financial strength rank of 7 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. Insperity, with high profitability, has been profitable for 10 out of the past 10 years. Over the past twelve months, the company generated a revenue of $6.30 billion and Earnings Per Share (EPS) of $4.75. Its operating margin of 3.82% ranks worse than 60.98% of the 1056 companies in the Business Services industry. However, GuruFocus ranks Insperity's profitability at 10 out of 10, indicating strong profitability.
Growth is one of the most important factors in the valuation of a company. Insperity's average annual revenue growth is 13.4%, which ranks better than 73.97% of the 972 companies in the Business Services industry. The 3-year average EBITDA growth is 12%, which ranks better than 54.37% of the 846 companies in the Business Services industry.
ROIC Vs. WACC
Another way to assess a company's profitability is by comparing its return on invested capital (ROIC) and the weighted cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. Ideally, the ROIC should be higher than the WACC. For the past 12 months, Insperity's ROIC is 32.42, and its WACC is 8.44.
Conclusion
In summary, the stock of Insperity (NSP, Financial) is believed to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 54.37% of 846 companies in the Business Services industry. To learn more about Insperity stock, you can check out its 30-Year Financials here.
To find out the high-quality companies that may deliver above-average returns, please check out the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
