INSPERITY, INC. (NSP) stock intrinsic value fair value estimate & owner earnings analysis

Insperity is a professional employer organization (PEO): it becomes the co-employer of its clients' workforces, handling payroll, benefits, workers' compensation and HR administration for small and mid-sized businesses, and earns its keep on the spread between what it charges clients and what it costs to deliver health insurance, workers' comp coverage and payroll processing for those employees. 2025 was a difficult year. Gross profit fell 14%, to $900 million, because the cost of group health coverage per covered employee rose 9.2% while the company's pricing increases only captured about 3%. Part of the gap (roughly a quarter of the increase in direct costs) came from a one-time unfavorable adjustment to prior-period claims reserves, a swing item that has moved favorably in other recent years. The rest reflects a genuine, if likely temporary, lag: Insperity reprices client contracts annually to match direct-cost trends, and 2025's unusually sharp jump in health-cost inflation outran that year's already-committed pricing. Net income for the year was slightly negative. Results for the first half of 2026 do not yet show the expected catch-up — profit was still running below the prior year — so we have not assumed a quick full recovery. We based our estimate of normal owner earnings on the median of the last seven years (2019-2025), which spans a COVID-era trough, a strong 2021-2022 recovery, and the current cost-inflation squeeze: about $3.19 per share. From there: - Our base case assumes gross profit per employee stabilizes as the immediate reserve item does not repeat and pricing gradually catches up with cost trends over the next three to four years, restoring owner earnings to roughly that historical norm, with modest low-single-digit growth after that from client-count growth and share buybacks. - Our bear case (roughly a one-in-ten outcome) assumes the pricing lag persists — competitive pressure from other PEOs and from companies handling HR in-house limits how much of rising health costs Insperity can pass through — combined with a continued mild decline in the number of client employees on the platform, which has already shrunk in some recent years. Owner earnings stay depressed near current levels for an extended period. - Our bull case (roughly a one-in-ten outcome) assumes the 2026 repricing cycle fully catches up faster than in the base case, client growth resumes as mid-sized businesses continue to outsource HR and benefits administration, and favorable claims experience continues, lifting owner earnings back above the 2022 peak by mid-decade. Discounting these paths at a flat rate and adding a modest, conservative allowance for value beyond the ten-year forecast (reflecting that this is a recurring-relationship service business without any dated contract-expiry cliff, but also without room for high growth) gives a base-case value of roughly $60 per share, with a bear case near $24 and a bull case near $96. Because a meaningful share of the value in every case rests on what the business is likely worth a decade from now, our estimate depends on Insperity's competitive position remaining intact over the long run, which we believe the filings support given its long track record of gross profit per employee running well above the PEO industry average. Accounting note: owner earnings were built from net income plus depreciation and amortization, less the estimated portion of capital spending needed just to maintain the current business (rather than grow it). We did not use reported operating cash flow directly as our starting point, because it swings enormously from one accounting period to the next purely based on which day of the week the period happens to end on, given how client payroll funds move through the company's accounts — a timing effect, not a change in the underlying economics. We stripped that out. We did not find anything else in the filings we were unable to reconcile.