Insperity (NSP)

HR outsourcing provider Insperity (NYSE:NSP) met Wall Streets revenue expectations in Q3 CY2025, with sales up 4% year on year to $1.62 billion. Its non-GAAP loss of $0.20 per share was significantly below analysts’ consensus estimates.

Company Overview

Pioneering the professional employer organization (PEO) industry it helped establish, Insperity (NYSE:NSP) provides human resources outsourcing services to small and medium-sized businesses, handling payroll, benefits, compliance, and HR administration.

The Professional Staffing & HR Solutions subsector within Business Services is set to benefit from evolving workforce trends, including the rise of remote work and the gig economy. With companies casting a wider net to find talent due to remote work, the expertise of staffing and recruiting companies is even more valuable. For those who invest wisely, the use of predictive AI in recruitment and screening as well as automation in HR workflows can enhance efficiency and scalability. On the other hand, digitization means that talent discovery is less of a manual process, opening the door for tech-first platforms. Additionally, regulatory scrutiny around data privacy in HR is evolving and may require companies in this sector to change their go-to-market strategies over time.

Insperity competes with the PEO divisions of large business services companies like Automatic Data Processing (NASDAQ:ADP) and Paychex (NASDAQ:PAYX), as well as other national PEO providers such as TriNet Group (NYSE:TNET), Vensure, and Rippling.

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $6.76 billion in revenue over the past 12 months, Insperity is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions.

As you can see below, Insperity grew its sales at an impressive 9.4% compounded annual growth rate over the last five years. This shows it had high demand, a useful starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Insperity’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 2.8% over the last two years was well below its five-year trend.

This quarter, Insperity grew its revenue by 4% year on year, and its $1.62 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 4.6% over the next 12 months. Although this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

Insperity was profitable over the last five years but held back by its large cost base. Its average operating margin of 2.7% was weak for a business services business.

Looking at the trend in its profitability, Insperity’s operating margin decreased by 3.2 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Insperity’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q3, Insperity generated an operating margin profit margin of negative 1.5%, down 1.6 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Insperity, its EPS declined by 18.7% annually over the last five years while its revenue grew by 9.4%. This tells us the company became less profitable on a per-share basis as it expanded.

We can take a deeper look into Insperity’s earnings to better understand the drivers of its performance. As we mentioned earlier, Insperity’s operating margin declined by 3.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Insperity, its two-year annual EPS declines of 47% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q3, Insperity reported adjusted EPS of negative $0.20, down from $0.39 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Insperity’s full-year EPS of $1.68 to grow 61.6%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Insperity has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3%, subpar for a business services business.

Taking a step back, we can see that Insperity’s margin dropped by 4.2 percentage points during that time. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s in the middle of an investment cycle.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

Insperity is a profitable, well-capitalized company with $440 million of cash and $436 million of debt on its balance sheet. This $4 million net cash position gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We struggled to find many positives in these results. While revenue in the quarter was in line, EPS fell short. Additionally, the company's full-year EPS guidance missed and its EPS guidance for next quarter fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 25.7% to $33.48 immediately after reporting.

Updated: December 4, 2025 at 11:10 PM EST

Are you wondering whether to buy Insperity or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Insperity doesn’t pass our quality test. Although its revenue growth was impressive over the last five years, it’s expected to deteriorate over the next 12 months and its declining EPS over the last five years makes it a less attractive asset to the public markets. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is its cash profitability fell over the last five years.

Insperity’s P/E ratio based on the next 12 months is 18.8x. At this valuation, there’s a lot of good news priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $45 on the company (compared to the current share price of $35.94).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.