Insperity (NSP) Stock Down 21.9% Year to Date: Here's Why

Shares of Insperity, Inc. NSP have declined 21.9% on a year-to-date basis against the 1.9% growth of the industry it belongs to.

 

Let’s delve deeper into the factors which have led to the company’s underperformance.

Lowered 2019 Guidance

Insperity lowered its 2019 guidance for adjusted EPS, adjusted EBITDA and average number of worksite employees (WSEEs).

The company now projects adjusted earnings in the band of $4.08-$4.20 per share (indicating growth of 9-12%) compared with the previously guided range of $4.59-$4.74 (which suggested growth of 22-26%).

Adjusted EBITDA is now anticipated to grow 3-6% to a range of $247-$253 million compared with the previously guided range of $278-$286 million (which indicated 16-19% growth).

Average WSEEs are expected to grow 12.7-13% to a range of 235,700-236,300 compared with the previously guided range of 237,350–239,500, indicating 13.5-14.5% growth.

Rise in Expenditures

Insperity continues to witness increase in expenses due to continuous investment in growth, technology, and product and service offerings. During the first nine months of 2019, adjusted operating expenses of $412.08 million increased 13% year over year. Adjusted operating expenses per worksite employee per month decreased 0.5% to $197, in the same time frame.

These increasing expenses are likely to keep the bottom line under pressure going forward.

Stiff Competition

Insperity operates in a highly fragmented and competitive professional employer organization (PEO) industry. Competition in this industry persists mainly in terms of quality of services offered, coupled with benefits associated with packaging and pricing. Additionally, the industry is exposed to relatively low level of market penetration. Also, PEO’s are heavily dependent on climatic conditions and market segments of the areas in which they operate.

Insperity primarily competes with the PEO divisions of large business services companies such as Automatic Data Processing, Inc. and Paychex, Inc., other national PEOs such as TriNet Group, Inc., payroll processors and human resources consultants, human resources technology solution companies, and large regional PEOs in certain areas of the country. Going forward, competition is expected to intensify as PEOs continue to expand nationally.

Zacks Rank & Stocks to Consider

Currently, Insperity carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader Zacks Business Services sector are Global Payments GPN, Mastercard MA and Cardtronics CATM. While Global Payments sports a Zacks Rank #1 (Strong Buy), Mastercard and Cardtronics carry a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected EPS (three to five years) growth rate for Global Payments, Mastercard and Cardtronics is 17%, 15.9% and 4%, respectively.

Biggest Tech Breakthrough in a Generation

Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.

A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.

See 8 breakthrough stocks now>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Cardtronics PLC (CATM) : Free Stock Analysis Report
 
Insperity, Inc. (NSP) : Free Stock Analysis Report
 
Global Payments Inc. (GPN) : Free Stock Analysis Report
 
Mastercard Incorporated (MA) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research