Intrinsic value of Insperity, Inc. - NSP

Previous Close

$121.06

  Intrinsic Value

$244.42

stock screener

  Rating & Target

str. buy

+102%

Previous close

$121.06

 
Intrinsic value

$244.42

 
Up/down potential

+102%

 
Rating

str. buy

We calculate the intrinsic value of NSP stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 5.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  17.00
  15.80
  14.72
  13.75
  12.87
  12.09
  11.38
  10.74
  10.17
  9.65
  9.18
  8.77
  8.39
  8.05
  7.75
  7.47
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
Revenue, $m
  4,480
  5,188
  5,951
  6,770
  7,641
  8,565
  9,539
  10,563
  11,637
  12,760
  13,932
  15,153
  16,425
  17,747
  19,121
  20,550
  22,034
  23,577
  25,180
  26,848
  28,582
  30,386
  32,264
  34,221
  36,259
  38,385
  40,601
  42,915
  45,330
  47,853
Variable operating expenses, $m
  4,059
  4,700
  5,391
  6,132
  6,922
  7,758
  8,640
  9,568
  10,541
  11,558
  12,618
  13,724
  14,875
  16,072
  17,317
  18,611
  19,955
  21,353
  22,805
  24,315
  25,885
  27,519
  29,221
  30,992
  32,839
  34,763
  36,771
  38,866
  41,054
  43,338
Fixed operating expenses, $m
  187
  191
  195
  200
  204
  209
  213
  218
  223
  227
  232
  238
  243
  248
  254
  259
  265
  271
  277
  283
  289
  295
  302
  309
  315
  322
  329
  337
  344
  352
Total operating expenses, $m
  4,246
  4,891
  5,586
  6,332
  7,126
  7,967
  8,853
  9,786
  10,764
  11,785
  12,850
  13,962
  15,118
  16,320
  17,571
  18,870
  20,220
  21,624
  23,082
  24,598
  26,174
  27,814
  29,523
  31,301
  33,154
  35,085
  37,100
  39,203
  41,398
  43,690
Operating income, $m
  234
  297
  365
  438
  516
  598
  685
  777
  874
  975
  1,082
  1,192
  1,307
  1,426
  1,550
  1,679
  1,814
  1,953
  2,099
  2,250
  2,407
  2,571
  2,742
  2,920
  3,105
  3,299
  3,501
  3,712
  3,932
  4,163
EBITDA, $m
  261
  327
  399
  477
  559
  647
  740
  838
  940
  1,047
  1,160
  1,276
  1,398
  1,525
  1,657
  1,794
  1,937
  2,085
  2,239
  2,400
  2,567
  2,741
  2,922
  3,111
  3,308
  3,513
  3,727
  3,951
  4,185
  4,430
Interest expense (income), $m
  2
  8
  15
  26
  38
  50
  63
  77
  92
  107
  124
  141
  158
  177
  196
  216
  237
  258
  281
  304
  329
  354
  380
  407
  436
  465
  496
  528
  562
  597
  633
Earnings before tax, $m
  227
  282
  339
  400
  465
  535
  608
  686
  767
  851
  941
  1,034
  1,130
  1,230
  1,334
  1,443
  1,555
  1,673
  1,795
  1,921
  2,054
  2,191
  2,335
  2,484
  2,640
  2,803
  2,973
  3,150
  3,336
  3,530
Tax expense, $m
  61
  76
  91
  108
  126
  144
  164
  185
  207
  230
  254
  279
  305
  332
  360
  389
  420
  452
  485
  519
  554
  592
  630
  671
  713
  757
  803
  851
  901
  953
Net income, $m
  165
  206
  247
  292
  340
  391
  444
  500
  560
  621
  687
  755
  825
  898
  974
  1,053
  1,135
  1,221
  1,310
  1,403
  1,499
  1,600
  1,704
  1,813
  1,927
  2,046
  2,170
  2,300
  2,435
  2,577

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,394
  1,615
  1,852
  2,107
  2,378
  2,666
  2,969
  3,288
  3,622
  3,971
  4,336
  4,716
  5,112
  5,523
  5,951
  6,396
  6,858
  7,338
  7,837
  8,356
  8,896
  9,457
  10,042
  10,651
  11,285
  11,947
  12,637
  13,357
  14,108
  14,893
Adjusted assets (=assets-cash), $m
  1,394
  1,615
  1,852
  2,107
  2,378
  2,666
  2,969
  3,288
  3,622
  3,971
  4,336
  4,716
  5,112
  5,523
  5,951
  6,396
  6,858
  7,338
  7,837
  8,356
  8,896
  9,457
  10,042
  10,651
  11,285
  11,947
  12,637
  13,357
  14,108
  14,893
Revenue / Adjusted assets
  3.214
  3.212
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
  3.213
Average production assets, $m
  130
  150
  173
  196
  222
  248
  277
  306
  337
  370
  404
  439
  476
  515
  555
  596
  639
  684
  730
  779
  829
  881
  936
  992
  1,052
  1,113
  1,177
  1,245
  1,315
  1,388
Working capital, $m
  -596
  -690
  -792
  -900
  -1,016
  -1,139
  -1,269
  -1,405
  -1,548
  -1,697
  -1,853
  -2,015
  -2,184
  -2,360
  -2,543
  -2,733
  -2,931
  -3,136
  -3,349
  -3,571
  -3,801
  -4,041
  -4,291
  -4,551
  -4,822
  -5,105
  -5,400
  -5,708
  -6,029
  -6,364
Total debt, $m
  285
  483
  697
  927
  1,171
  1,429
  1,702
  1,989
  2,290
  2,605
  2,933
  3,275
  3,631
  4,001
  4,386
  4,786
  5,202
  5,634
  6,084
  6,551
  7,036
  7,542
  8,068
  8,616
  9,187
  9,782
  10,403
  11,051
  11,728
  12,434
Total liabilities, $m
  1,255
  1,453
  1,667
  1,896
  2,140
  2,399
  2,672
  2,959
  3,260
  3,574
  3,903
  4,245
  4,601
  4,971
  5,356
  5,756
  6,172
  6,604
  7,053
  7,520
  8,006
  8,511
  9,038
  9,586
  10,157
  10,752
  11,373
  12,021
  12,698
  13,404
Total equity, $m
  139
  161
  185
  211
  238
  267
  297
  329
  362
  397
  434
  472
  511
  552
  595
  640
  686
  734
  784
  836
  890
  946
  1,004
  1,065
  1,129
  1,195
  1,264
  1,336
  1,411
  1,489
Total liabilities and equity, $m
  1,394
  1,614
  1,852
  2,107
  2,378
  2,666
  2,969
  3,288
  3,622
  3,971
  4,337
  4,717
  5,112
  5,523
  5,951
  6,396
  6,858
  7,338
  7,837
  8,356
  8,896
  9,457
  10,042
  10,651
  11,286
  11,947
  12,637
  13,357
  14,109
  14,893
Debt-to-equity ratio
  2.050
  2.990
  3.760
  4.400
  4.920
  5.360
  5.730
  6.050
  6.320
  6.560
  6.760
  6.940
  7.100
  7.240
  7.370
  7.480
  7.590
  7.680
  7.760
  7.840
  7.910
  7.970
  8.030
  8.090
  8.140
  8.190
  8.230
  8.270
  8.310
  8.350
Adjusted equity ratio
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  165
  206
  247
  292
  340
  391
  444
  500
  560
  621
  687
  755
  825
  898
  974
  1,053
  1,135
  1,221
  1,310
  1,403
  1,499
  1,600
  1,704
  1,813
  1,927
  2,046
  2,170
  2,300
  2,435
  2,577
Depreciation, amort., depletion, $m
  26
  30
  34
  39
  44
  49
  54
  60
  66
  72
  78
  85
  92
  99
  107
  115
  123
  131
  140
  150
  159
  169
  180
  191
  202
  214
  226
  239
  253
  267
Funds from operations, $m
  192
  236
  282
  331
  384
  440
  499
  561
  626
  694
  765
  839
  916
  997
  1,081
  1,168
  1,258
  1,352
  1,450
  1,552
  1,659
  1,769
  1,884
  2,004
  2,130
  2,260
  2,397
  2,539
  2,688
  2,843
Change in working capital, $m
  -87
  -94
  -102
  -109
  -116
  -123
  -130
  -136
  -143
  -149
  -156
  -162
  -169
  -176
  -183
  -190
  -197
  -205
  -213
  -222
  -231
  -240
  -250
  -260
  -271
  -283
  -295
  -308
  -321
  -336
Cash from operations, $m
  278
  330
  383
  440
  500
  562
  628
  697
  769
  843
  921
  1,001
  1,085
  1,173
  1,263
  1,358
  1,456
  1,558
  1,664
  1,774
  1,889
  2,009
  2,134
  2,264
  2,401
  2,543
  2,691
  2,847
  3,009
  3,179
Maintenance CAPEX, $m
  -22
  -25
  -29
  -33
  -38
  -43
  -48
  -53
  -59
  -65
  -71
  -78
  -85
  -92
  -99
  -107
  -115
  -123
  -131
  -140
  -150
  -159
  -169
  -180
  -191
  -202
  -214
  -226
  -239
  -253
New CAPEX, $m
  -17
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -64
  -67
  -70
  -73
Cash from investing activities, $m
  -39
  -46
  -51
  -57
  -63
  -70
  -76
  -83
  -90
  -98
  -105
  -113
  -122
  -130
  -139
  -148
  -158
  -168
  -178
  -188
  -200
  -211
  -223
  -237
  -250
  -264
  -278
  -293
  -309
  -326
Free cash flow, $m
  239
  284
  332
  383
  437
  493
  552
  614
  679
  746
  815
  888
  964
  1,043
  1,125
  1,210
  1,298
  1,390
  1,486
  1,585
  1,689
  1,797
  1,910
  2,028
  2,151
  2,279
  2,413
  2,553
  2,700
  2,853
Issuance/(repayment) of debt, $m
  141
  198
  214
  229
  244
  259
  273
  287
  301
  315
  328
  342
  356
  370
  385
  400
  416
  432
  449
  467
  486
  505
  526
  548
  571
  595
  621
  648
  677
  707
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  141
  198
  214
  229
  244
  259
  273
  287
  301
  315
  328
  342
  356
  370
  385
  400
  416
  432
  449
  467
  486
  505
  526
  548
  571
  595
  621
  648
  677
  707
Total cash flow (excl. dividends), $m
  380
  483
  546
  612
  681
  752
  825
  901
  979
  1,060
  1,144
  1,230
  1,320
  1,413
  1,510
  1,610
  1,714
  1,822
  1,935
  2,052
  2,175
  2,303
  2,436
  2,576
  2,722
  2,874
  3,034
  3,201
  3,376
  3,560
Retained Cash Flow (-), $m
  -62
  -22
  -24
  -25
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -79
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  318
  461
  522
  587
  654
  723
  795
  869
  946
  1,025
  1,107
  1,192
  1,281
  1,372
  1,467
  1,565
  1,668
  1,774
  1,885
  2,000
  2,121
  2,247
  2,378
  2,515
  2,658
  2,808
  2,965
  3,129
  3,301
  3,481
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  305
  422
  455
  483
  507
  525
  537
  543
  543
  538
  526
  509
  487
  461
  431
  398
  363
  327
  290
  254
  219
  186
  156
  128
  103
  82
  64
  48
  36
  26
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Insperity, Inc. provides a range of human resources (HR) and business solutions. The Company's HR services offerings are provided through its Workforce Optimization and Workforce Synchronization solutions (together, its professional employer organization (PEO) HR Outsourcing solutions), which encompass a range of human resources functions, including payroll and employment administration, employee benefits, workers' compensation, performance management and training and development services, along with its cloud-based human capital management platform, the Employee Service Center (ESC). In addition to its PEO HR Outsourcing solutions, it offers various other business performance solutions, including Human Capital Management, Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Retirement Services and Insurance Services, which are offered through desktop applications and cloud-based delivery models.

FINANCIAL RATIOS  of  Insperity, Inc. (NSP)

Valuation Ratios
P/E Ratio 77.1
Price to Sales 1.7
Price to Book 83.5
Price to Tangible Book
Price to Cash Flow 38.3
Price to Free Cash Flow 51.4
Growth Rates
Sales Growth Rate 12.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 88.9%
Cap. Spend. - 3 Yr. Gr. Rate 23.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 170.5%
Total Debt to Equity 170.5%
Interest Coverage 54
Management Effectiveness
Return On Assets 8%
Ret/ On Assets - 3 Yr. Avg. 5.5%
Return On Total Capital 39.2%
Ret/ On T. Cap. - 3 Yr. Avg. 24.1%
Return On Equity 56.7%
Return On Equity - 3 Yr. Avg. 29.9%
Asset Turnover 3.5
Profitability Ratios
Gross Margin 16.7%
Gross Margin - 3 Yr. Avg. 16.9%
EBITDA Margin 4.2%
EBITDA Margin - 3 Yr. Avg. 3.5%
Operating Margin 3.6%
Oper. Margin - 3 Yr. Avg. 2.7%
Pre-Tax Margin 3.6%
Pre-Tax Margin - 3 Yr. Avg. 2.7%
Net Profit Margin 2.2%
Net Profit Margin - 3 Yr. Avg. 1.6%
Effective Tax Rate 37.1%
Eff/ Tax Rate - 3 Yr. Avg. 39.9%
Payout Ratio 31.8%

NSP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NSP stock intrinsic value calculation we used $3829 million for the last fiscal year's total revenue generated by Insperity, Inc.. The default revenue input number comes from 0001 income statement of Insperity, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our NSP stock valuation model: a) initial revenue growth rate of 17% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for NSP is calculated based on our internal credit rating of Insperity, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Insperity, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of NSP stock the variable cost ratio is equal to 90.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $183 million in the base year in the intrinsic value calculation for NSP stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Insperity, Inc..

Corporate tax rate of 27% is the nominal tax rate for Insperity, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the NSP stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for NSP are equal to 2.9%.

Life of production assets of 5.2 years is the average useful life of capital assets used in Insperity, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for NSP is equal to -13.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $77.676 million for Insperity, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 40.936 million for Insperity, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Insperity, Inc. at the current share price and the inputted number of shares is $5.0 billion.

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