Is NSP a good stock to buy? We came across a bullish thesis on Insperity, Inc. on Iggy on Investing Newsletter’s Substack by Iggy on Investing. In this article, we will summarize the bulls’ thesis on NSP. Insperity, Inc.’s share was trading at $31.68 as of May 26th. NSP’s trailing and forward P/E were 70.12 and 15.85 respectively according to Yahoo Finance.
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Insperity, Inc. (NSP) operates as a Professional Employer Organization (PEO) that co-employs workers for small and mid-sized businesses, providing full-stack HR services including payroll, compliance, benefits administration, workers’ compensation, and access to large-group health insurance. The business aggregates employees across hundreds of SMB clients, enabling cost advantages in health insurance that typically reduce premiums by 20–40%, a structural benefit that software alone cannot replicate.
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High switching costs, driven by payroll, tax, and benefits integration across states, result in 83–85% retention, with most attrition driven by business failure or M&A rather than competitive loss. The PEO industry is structurally attractive, having grown at a 7.6% CAGR from 2008 to 2020, while penetration remains low at roughly 15% in the 10–99 employee segment, supporting continued above-GDP growth. Insperity holds a leading position alongside ADP in a consolidated market where the top five players control nearly half of worksite employees.
Temporary headwinds including healthcare cost inflation, HRScale Workday investment expenses, and SMB hiring slowdown compressed earnings, while market fears around AI disruption and debt covenants exaggerated downside risk despite improving operational trends.
Normalizing EBITDA per WSE at $83–90 implies $236–264M in free cash flow, against a $1.25B market cap, producing a 19–21% FCF yield, with additional support from a ~7% dividend yield and minimal maintenance capex. At a 15x normalized FCF multiple, intrinsic value approaches $3.5–4B, implying roughly 3x upside from current levels, with further rerating potential if healthcare normalization and hiring recovery continue. AI risk appears overstated given structural liability moat intact.
Previously, we covered a bullish thesis on ADP by David in November 2024, which highlighted workforce management scale, payroll dominance, and float-driven cash flows. ADP’s stock price has depreciated by approximately 28.33% since our coverage. Iggy on Investing shares a similar view but emphasizes Insperity’s higher-risk, higher-upside PEO model, temporary headwinds, and stronger rerating potential within the same workforce management industry.
Insperity, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held NSP at the end of the first quarter which was 28 in the previous quarter. While we acknowledge the risk and potential of NSP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NSP and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
