Insperity (NSP) – Stock Analysis

Does Insperity Earnings Beat Mean it’s Time to Buy?

Insperity (NSP) has been on a tear the last year. The human resources and business solutions provider has seen remarkable growth. In the firm’s Q1 2019 earnings announcement in April, net income and EPS were up 53% and 57% respectively. NSP has several revenue streams and has showed quarter after quarter of growth. As you can see in the below EPS graph below, (courtesy of Seeking Alpha) the company has continued to surpass analysts’ estimates.

Now, this must be a sign to jump on the band wagon and invest? In my humble opinion, it is not. When I look at a company and whether to invest, I try and look at where the revenue is generated from and what affects it. This could mean looking at the supply chain of a retail outlet or analyzing the cost associated with a coffee shop and how the commodity prices have fluctuated. In the case of NSP, the rapid growth is largely associated with the need for firms who need their services for their employees.

With a booming economy and jobless claims at near 40 year lows, this is the best environment for a HR firm like NSP. The more employees being hired and firms needing to train these employees, the better companies like Insperity. However, is now really the best time? Do we jump on a stock while it is at its peak? I believe the old adage is, buy low sell high, not the reverse. Think of it in this sense, we are on day 3,714 of the longest bull market in the last 50 years. With valuations across the board higher than they have ever been, it might be wiser to invest elsewhere. Below are to graphs showing the correlation between the jobless claims and the stock price (please see links below). Taking into consideration there is approximately a month lag, it does make you stop and think.