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Coverage Initiation: Insperity
Value Line recently initiated coverage of Insperity, Inc. (NSP) in its flagship product, The Value Line Investment Survey. The company offers a variety of human resource and business solutions to small and mid-sized companies. Based out of Kingwood, Texas (in the Greater Houston area), Insperity employs more than 2,100, operating out of 48 office locations in 24 markets across the country.
Since its founding in 1986, Insperity has evolved from a professional employment organization into a full-fledged business performance solutions provider. For most of its 25-plus year existence, the company was called Ameristaff, Inc. In March, 2011, the Insperity name was born to better define the company’s diversified offerings that no longer fell under the temporary employment umbrella that the “Ameristaff” name reflected.
The Workforce Optimization platform, for instance, is the company’s touchstone product and addresses many human resources functions, including payroll and employment administration, employee benefits, workers compensation, government compliance, and performance management services. The wide-range of tasks that the platform provides aims to relieve businesses of administrative and regulatory burdens while also promoting cost-cutting initiatives and further growth of the specific business. Adjacent businesses are recruiting services, expense management, employment screening, and retirement services, among others.
Still, and despite the variety of regions Insperity serves, exposure to certain markets warrants some attention. When combined, its operations in Texas (17% of 2011 revenues) and California (23%) are responsible for an oversized share of total business. This distribution renders the company dependent on continued economic growth in two of the nation’s largest states.
Insperity may also see increased competition from new market entrants. “Fee for service” companies that execute specific human resource tasks may be more appealing for certain clients, rather than the collection of services Insperity offers. Larger competitors may have an advantage in attracting new clients given their comparatively limited overhead obligations, as many of them employ workforces about half the size of Insperity’s.
All told, Insperity is well-positioned for sustained revenue growth in the future. The Workforce Optimization solution will likely see strong demand as companies aim to reduce overhead and increase operational efficiency across all facets of their HR departments. The strong cash presence will enable it to invest in research and development for future products and allow it to remain competitive. We advise investors to also note the company’s debt-free balance sheet and healthy dividend payment.
Subscribers interested in owning a piece of this HR services provider are advised to consult Value Line’s quarterly reports for Insperity, as well as any supplemental reports and relevant articles as important news items arise.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.