Editor's Note: Our Industrials analyst Jay Van Sciver is hosting a deep-dive Black Book call on our Insperity (NSP) short thesis today at 2:00pm ET. If you're an institutional investor interested in this call email firstname.lastname@example.org for access. A small snapshot of his short call follows below.
Shares of Insperity are trading as though the PEO industry isn’t cyclical and increasingly mature. The cyclical elements extend beyond employment trends to costs, regulations, and marketing.
The industry has enjoyed exceptional tailwinds in recent years, while limited Street coverage, arcane business metrics, and a move up in index membership have left the shares untethered to underlying business realities. With steep comps, intensifying competition, slowing growth, and a lack of incremental tailwinds, investors will likely be just as surprised by the cyclical downside as they were by the post-GFC recovery.
We see greater than 50% downside in the shares, with catalysts positioned through 2020.