Editor's Note: Shares of Insperity (NSP) have fallen almost 9% since our Industrials analyst Jay Van Sciver hosted a deep-dive Black Book call on our short thesis for institutional investors on 3/14/19. A small snapshot from his call invite follows below. For more info email email@example.com.
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.