When Should You Buy Insperity, Inc. (NYSE:NSP)?

Insperity, Inc. (NYSE:NSP), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Insperity’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Insperity

What's The Opportunity In Insperity?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Insperity’s ratio of 24.97x is trading slightly below its industry peers’ ratio of 25.89x, which means if you buy Insperity today, you’d be paying a decent price for it. And if you believe that Insperity should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Insperity’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Insperity?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Insperity, it is expected to deliver a highly negative earnings growth in the upcoming, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, NSP appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on NSP, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on NSP for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on NSP should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Insperity at this point in time. For example, we've found that Insperity has 2 warning signs (1 makes us a bit uncomfortable!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Insperity, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.