Insperity, Inc. (NSP) recently delivered its 7th consecutive positive earnings surprise on the back of 14% revenue growth and 32% EPS growth.

Analysts revised their estimates higher for both 2011 and 2012 off the strong quarter, sending the stock to a Zacks #1 Rank (Strong Buy).

The company also has a solid balance sheet and pays a dividend that yields 2.4%. Valuation is attractive too, with shares sporting a PEG ratio of just 0.5.

Company Description

Insperity, Inc. is a professional employer organization that provides full-service human resources to small and mid-sized businesses throughout the United States. The company stands to benefit from an improving economy as businesses hire new employees.

Formerly known as Administaff, the company was founded in 1986 and has a market cap of $656 million.

Third Quarter Results

Insperity reported better than expected results for the third quarter of 2011. Earnings per share came in at 37 cents, crushing the Zacks Consensus Estimate of 26 cents. It was a stellar 32% increase over the same quarter in 2010.

Revenues rose 14% to $471.8 million, driven by a 9% increase in the average number of worksite employees paid per month and a 4.5% increase in revenues per worksite employee per month.

Meanwhile, gross profit expanded from 17.8% to 18.4% of revenue as the average gross profit per worksite employee per month increased 8% to $245.

Strong Growth Prospects

Following strong Q3 results, analysts revised their estimates higher for both 2011 and 2012, sending the stock to a Zacks #1 Rank (Strong Buy).

The Zacks Consensus Estimate for 2011 is now $1.27, representing 47% annual EPS growth. The 2012 consensus estimate is currently $1.69, corresponding with 34% EPS growth.

Solid Dividend

On top of strong growth prospects, Insperity also pays a dividend that yields 2.4%.

The company has a solid balance sheet with a healthy cash balance and no long-term debt. It began paying a dividend in 2005 and has increased it 4 times since then at a compound annual growth rate of 14%.

Reasonable Valuation

The valuation picture looks reasonable for NSP. Shares trade at 15.3x 12-month forward earnings, a discount to its 10-year median of 20.5x. If the labor market continues to improve, expect to see its earnings multiple revert toward its historical median.

Its PEG ratio is just 0.5 based on the consensus long-term EPS growth rate of 34%.

The Bottom Line

With rising earnings estimates, strong growth projections, a 2.4% dividend yield and very reasonable valuation, Insperity offers investors a lot of upside potential.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.


 
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