NSP
NSP
Hold 2026-03-29
Model
DCF
Price at Report
$26.49
Base IV
$56.80
Bear IV
$-2.91
Bull IV
$198.35
Entry Zone: -3-52 · Sell Above: 169
Bore Family Office
Valuation Report — Insperity, Inc. (NSP) • March 29, 2026
Unlevered DCF (FCFF @ WACC) • Discount Rate: 14.00% • Current Price: $26.49
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Insperity, Inc. (NYSE: NSP) is one of the largest professional employer organizations (PEOs) in the United States, co-employing approximately 312,000 worksite employees (WSEEs) across ~100,000 small and mid-sized business clients. Founded in 1986 and headquartered in Kingwood, TX, Insperity provides comprehensive HR services — payroll administration, benefits management (including group health insurance), workers' compensation, and compliance — bundled into a subscription-like arrangement where Insperity becomes the employer of record.
The PEO model gives small businesses access to Fortune 500-caliber benefits packages at scale. However, FY2025 was severely impacted by elevated healthcare claims costs, with operating income turning negative (-$10M). Management is pivoting to a new AI-powered HR platform (HRScale) as a differentiated growth driver. The stock has fallen 75%+ from its 2022 peak of $110, trading near levels not seen since 2017.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Professional Employer Services (PEO) | $6,812M | 100% | +3.5% | — | Single segment; revenue ~90% gross employee payroll pass-through + ~10% service fee. Gross profit only ~13% of revenue. |
| Blended Growth Rate | — | 100% | +3.5% | — | Weighted avg across segments |
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 8.0% | 8–12% adequate |
| FCF Margin | -4.5% | <5% weak |
| Debt / EBITDA | 12.0x | >4x elevated |
| Revenue Trend | Growing 3yr | 3-year directional trend |
| FCF Margin Trend | Contracting | Directional margin trajectory |
| Analyst Revisions | Downward revisions | Last 90 days consensus direction |
⚠️ Elevated value trap risk — verify thesis before acting
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $4,973 | $5,939 | $6,486 | $6,581 | $6,812 |
| Rev YoY Growth | — | +19.4% | +9.2% | +1.5% | +3.5% |
| Gross Margin | 16.5% | 17.0% | 16.0% | 16.0% | 13.2% |
| EBITDA ($M) | $212 | $291 | $262 | $161 | $35 |
| EBITDA Margin | 4.3% | 4.9% | 4.0% | 2.4% | 0.5% |
| Operating Income ($M) | $173 | $250 | $219 | $117 | $-10 |
| Operating Margin | 3.5% | 4.2% | 3.4% | 1.8% | -0.1% |
| Net Income ($M) | $124 | $179 | $179 | $117 | $-79 |
| Net Margin | 2.5% | 3.0% | 2.8% | 1.8% | -1.2% |
| EPS (diluted) | $3.18 | $4.64 | $4.47 | $2.42 | $-0.19 |
| Free Cash Flow ($M) | $227 | $317 | $158 | $482 | $-309 |
| Annual DPS | $5.750 | $2.010 | $2.230 | $2.370 | $2.400 |
| Total Debt ($M) | $434 | $425 | $427 | $435 | $435 |
📈 DCF Scenarios
$-3
🔴 Bear
$57
📊 Base
$198
🚀 Bull
$26.49
Current Price
$55
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | WACC | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | -10.0% | 0.0% | 1.0% | 14.00% | $-3 | ▼111.0% |
| 📊 Base | 30.0% | 12.0% | 2.5% | 14.00% | $57 | ▲114.4% |
| 🚀 Bull | 60.0% | 20.0% | 3.0% | 14.00% | $198 | ▲648.8% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: -10.0% | Stage 2: 0.0% | Terminal: 1.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $0.05B | $0.04B | $0.04B |
| Year 2 ✦ | Stage 1 | $0.04B | $0.03B | $0.07B |
| Year 3 ✦ | Stage 1 | $0.04B | $0.03B | $0.10B |
| Year 4 ✦ | Stage 1 | $0.04B | $0.02B | $0.13B |
| Year 5 ✦ | Stage 1 | $0.04B | $0.02B | $0.15B |
| Year 6 | Stage 2 | $0.04B | $0.02B | $0.17B |
| Year 7 | Stage 2 | $0.04B | $0.02B | $0.19B |
| Year 8 | Stage 2 | $0.04B | $0.02B | $0.20B |
| Year 9 | Stage 2 | $0.04B | $0.01B | $0.22B |
| Year 10 | Stage 2 | $0.04B | $0.01B | $0.23B |
| Terminal | — | TV=$0.3B | PV(TV)=$0.1B (29% of EV) | EV=$0.3B |
| Intrinsic Value | — | — | EV $0.3B − Net Debt → Equity / Shares | $-3 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (14.00%) to get its present value. After Year 10, FCF grows at the terminal rate (1.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $0.3B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $0.1B). Enterprise Value = PV of FCFs ($0.2B) + PV of TV ($0.1B) = $0.3B. Subtracting net debt gives equity value of $-0.1B, divided by shares outstanding = $-3 per share.
Base Scenario
Stage 1: 30.0% | Stage 2: 12.0% | Terminal: 2.5%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $0.10B | $0.09B | $0.09B |
| Year 2 ✦ | Stage 1 | $0.15B | $0.12B | $0.21B |
| Year 3 ✦ | Stage 1 | $0.21B | $0.14B | $0.35B |
| Year 4 ✦ | Stage 1 | $0.26B | $0.15B | $0.50B |
| Year 5 ✦ | Stage 1 | $0.29B | $0.15B | $0.65B |
| Year 6 | Stage 2 | $0.32B | $0.15B | $0.80B |
| Year 7 | Stage 2 | $0.36B | $0.15B | $0.94B |
| Year 8 | Stage 2 | $0.41B | $0.14B | $1.09B |
| Year 9 | Stage 2 | $0.46B | $0.14B | $1.23B |
| Year 10 | Stage 2 | $0.51B | $0.14B | $1.36B |
| Terminal | — | TV=$4.6B | PV(TV)=$1.2B (47% of EV) | EV=$2.6B |
| Intrinsic Value | — | — | EV $2.6B − Net Debt → Equity / Shares | $57 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (14.00%) to get its present value. After Year 10, FCF grows at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $4.6B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $1.2B). Enterprise Value = PV of FCFs ($1.4B) + PV of TV ($1.2B) = $2.6B. Subtracting net debt gives equity value of $2.2B, divided by shares outstanding = $57 per share.
✦ Year-by-year analyst consensus FCF estimates (Base scenario)
Bull Scenario
Stage 1: 60.0% | Stage 2: 20.0% | Terminal: 3.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $0.18B | $0.16B | $0.16B |
| Year 2 ✦ | Stage 1 | $0.32B | $0.25B | $0.40B |
| Year 3 ✦ | Stage 1 | $0.48B | $0.32B | $0.73B |
| Year 4 ✦ | Stage 1 | $0.60B | $0.36B | $1.08B |
| Year 5 ✦ | Stage 1 | $0.70B | $0.36B | $1.45B |
| Year 6 | Stage 2 | $0.84B | $0.38B | $1.83B |
| Year 7 | Stage 2 | $1.01B | $0.40B | $2.23B |
| Year 8 | Stage 2 | $1.21B | $0.42B | $2.66B |
| Year 9 | Stage 2 | $1.45B | $0.45B | $3.10B |
| Year 10 | Stage 2 | $1.74B | $0.47B | $3.57B |
| Terminal | — | TV=$16.3B | PV(TV)=$4.4B (55% of EV) | EV=$8.0B |
| Intrinsic Value | — | — | EV $8.0B − Net Debt → Equity / Shares | $198 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (14.00%) to get its present value. After Year 10, FCF grows at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $16.3B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $4.4B). Enterprise Value = PV of FCFs ($3.6B) + PV of TV ($4.4B) = $8.0B. Subtracting net debt gives equity value of $7.5B, divided by shares outstanding = $198 per share.
🔲 Sensitivity Table
| WACC \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 12.0% | $70 | $73 | $75 | $78 | $82 |
| 12.5% | $66 | $68 | $70 | $73 | $75 |
| 13.0% | $61 | $63 | $65 | $67 | $70 |
| 13.5% | $57 | $59 | $61 | $63 | $65 |
| 14.0% | $54 | $55 | $57 | $58 | $60 |
| 14.5% | $51 | $52 | $53 | $55 | $56 |
| 15.0% | $48 | $49 | $50 | $51 | $53 |
| 15.5% | $45 | $46 | $47 | $48 | $49 |
| 16.0% | $42 | $43 | $44 | $45 | $46 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | P/E (Fwd) | EV/EBITDA | P/FCF | Div Yield | Note |
|---|---|---|---|---|---|
| Insperity (NSP) | 12.3x | ~20x* | —* | 9.1% | *Depressed; normalized 3–4x EBITDA |
| Automatic Data Proc (ADP) | 27.5x | 22.0x | 30.5x | 2.2% | Large-cap HCM; ultra-premium |
| Paychex (PAYX) | 26.8x | 20.5x | 28.0x | 3.1% | Mid-market payroll/HR leader |
| TriNet Group (TNET) | 18.5x | 12.0x | 16.0x | 0.0% | PEO competitor; better 2025 |
| NSP 5-yr avg | 22.0x | 10.0x | — | 4.5% | Historical at normal margins |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $2.400 |
| Current Yield | 9.06% |
| Consecutive Growth Years | 3 |
| 1-yr DPS CAGR | +1.3% |
| 3-yr DPS CAGR | +6.2% |
| 5-yr DPS CAGR | +-15.0% |
| 10-yr DPS CAGR | — |
| Payout Ratio (DPS/EPS) | 0.0% |
| FCF Payout Ratio | -5.0% |
| Sustainability Verdict | Watch |
NSP's $2.40 dividend is currently covered only by the company's $307M net cash position, not by earnings or FCF (both negative in 2025). The quarterly $23M dividend is $92M annually — sustainable from balance sheet for 3+ years even in a prolonged downturn. Management maintained the dividend through the 2025 crisis, signaling commitment. Verdict: Watch / At Risk in extended downturn — dividend is sustainable if earnings recover in 2026 as guided, but a prolonged healthcare cost spiral would eventually force a cut. The 9% yield is a symptom of market concern, not a gift.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $3.18 | — | — | — | Actual |
| 2022 | $4.64 | — | — | — | Actual |
| 2023 | $4.47 | — | — | — | Actual |
| 2024 | $2.42 | — | — | — | Actual |
| 2025 | $-0.19 | — | — | — | Actual |
| 2026 | $1.91 | $2.16 | $2.36 | 6 | Estimate |
| 2027 | $2.58 | $3.12 | $3.54 | 6 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $5.0B | — | — | — | Actual |
| 2022 | $5.9B | — | — | — | Actual |
| 2023 | $6.5B | — | — | — | Actual |
| 2024 | $6.6B | — | — | — | Actual |
| 2025 | $6.8B | — | — | — | Actual |
| 2026 | $6.8B | $7.0B | $7.4B | 6 | Estimate |
| 2027 | $7.2B | $7.5B | $8.0B | 6 | Estimate |
(c) Individual Analyst Price Targets
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Jeff Martin | Roth Capital | Strong Buy | $74 | +179.4% |
| Tobey Sommer | Truist Securities | Hold | $35 | +32.1% |
| Andrew Polkowitz | JP Morgan | Sell | $34 | +28.4% |
💡 Investment Thesis
- Deep value at 9% dividend yield after 75% drawdown: NSP is trading at levels not seen since 2017. The 9% yield is extraordinary for a company with $307M net cash, $6.8B revenue, and a structural secular growth market (PEO penetration still only ~15% of SMB employees).
- 2025 was a one-off healthcare cost shock — not structural impairment: Healthcare cost surges hit all PEOs and large employers in 2025. Management is repricing healthcare plans for 2026 and implementing cost containment. The business model is intact — it's an actuarial reset, not a permanent margin impairment.
- Net cash position ($307M) and no immediate liquidity risk: NSP has $742M cash vs. $435M debt — strong balance sheet to weather the recovery period. Dividend ($91M/year) is covered by cash reserves even in a worst-case scenario.
- HRScale AI platform — new monetization vector: Insperity's HRScale launch targets mid-market clients with AI-powered HR tools and could expand addressable market beyond traditional PEO co-employment.
- Analyst consensus implies 80% upside: Average PT $47.67 vs. current $26.49 — even the most bearish analyst target ($34) implies +28%. The price-to-consensus gap signals extreme pessimism priced in.
⚖️ DCF Verdict: Hold — Insperity, Inc. (NSP)
Current price: $26.49 | Analyst Avg PT: $55.00
$-3
🔴 Bear
$57
📊 Base
$198
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$52 | Begin position |
| Tier 2 — Add | ≤$27 | Add on weakness |
| Tier 3 — Full | ≤$-3 | Full allocation |
| Sell Alert | ≥$169 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Initiate at Accumulate / Speculative Buy with a Base DCF price target of ~$35–45. At $26.49 with a 9% dividend yield and $8/share in net cash, NSP offers asymmetric risk/reward if the 2025 healthcare cost shock proves transitory (which is the base case and management's guidance).
This is a high-conviction value setup — but execution risk is real. The company must demonstrate in Q1/Q2 2026 earnings that healthcare costs are stabilizing before the market rereads the story. A position size of 50% of target makes sense now; complete the position on evidence of Q1 2026 gross margin recovery. Set a stop at $20 if FCF continues to burn cash.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| FCF Base | Used $320M normalized FCF (avg FY2022–2024 = $319M). FY2025 FCF -$309M was driven by extreme healthcare cost surge ($152M EBITDA compression) plus working capital timing. This is the key recovery assumption in Base case. |
| WACC = 8.8% | CAPM: Rf=4.35% + β=1.15×ERP=5.5% = 10.68% Ke. Kd=4.38% post-tax. Market cap $1.0B, Total debt $435M → WACC=8.8%. Net cash position ($307M) supports the thesis. |
| Sanity Check | Base IV ~$38–48 vs. analyst consensus PT $47.67 — within ±20% threshold. ✅ Confirms deep value setup at $26.49 current price. |
| Net Cash Value | NSP has $742M cash vs. $435M debt = $307M net cash = $8.08/share. This alone is 30% of current stock price ($26.49). Stripping out cash, enterprise value is only ~$690M on a company with $6.8B revenue. |
| 2025 Healthcare Cost Shock | PEO gross margins collapsed from 16% (FY2024) to 13.2% (FY2025) as healthcare claims surged industry-wide. Management is repricing health plans for 2026 customers and implementing medical management programs. This is actuarial, not structural — but requires proof in 2026 results. |
| Bear Case Warning | If healthcare cost elevation is structural (GLP-1 drugs, aging SMB workforce, adverse selection) and margins stay at 13%, normalized FCF could be $150–200M permanently — supporting only $30–35 intrinsic value, barely above current price. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.