Critical Review: Insperity (NYSE:NSP) versus Resources Connection (NASDAQ:RGP)

Insperity (NYSE:NSP) and Resources Connection (NASDAQ:RGP) are both small-cap business services companies, but which is the superior business? We will compare the two businesses based on the strength of their profitability, dividends, institutional ownership, analyst recommendations, valuation, earnings and risk.

Institutional & Insider Ownership

93.4% of Insperity shares are owned by institutional investors. Comparatively, 93.2% of Resources Connection shares are owned by institutional investors. 5.5% of Insperity shares are owned by company insiders. Comparatively, 7.9% of Resources Connection shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Insperity and Resources Connection, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Insperity	2	2	1	0	1.80
Resources Connection	2	0	2	0	2.00

Insperity currently has a consensus target price of $48.25, suggesting a potential upside of 7.30%. Resources Connection has a consensus target price of $6.00, suggesting a potential upside of 25.00%. Given Resources Connection’s stronger consensus rating and higher probable upside, analysts plainly believe Resources Connection is more favorable than Insperity.

Dividends

Insperity pays an annual dividend of $2.40 per share and has a dividend yield of 5.3%. Resources Connection pays an annual dividend of $0.28 per share and has a dividend yield of 5.8%. Insperity pays out 521.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Resources Connection pays out -7.0% of its earnings in the form of a dividend. Insperity has raised its dividend for 14 consecutive years. Resources Connection is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Insperity and Resources Connection”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Insperity	$6.58 billion	0.26	$91.00 million	$0.46	97.75
Resources Connection	$551.33 million	0.29	-$191.78 million	($4.02)	-1.19

Insperity has higher revenue and earnings than Resources Connection. Resources Connection is trading at a lower price-to-earnings ratio than Insperity, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Insperity and Resources Connection’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Insperity	0.25%	12.53%	0.59%
Resources Connection	-26.13%	0.62%	0.43%

Risk & Volatility

Insperity has a beta of 0.47, meaning that its share price is 53% less volatile than the S&P 500. Comparatively, Resources Connection has a beta of 0.49, meaning that its share price is 51% less volatile than the S&P 500.

Summary

Insperity beats Resources Connection on 9 of the 17 factors compared between the two stocks.

About Insperity

Insperity, Inc. engages in the provision of human resources (HR) and business solutions to improve business performance for small and medium-sized businesses primarily in the United States. It offers its HR services through its workforce optimization and workforce synchronization solutions that include a range of human resources functions, such as payroll and employment administration, employee benefits, workers' compensation, government compliance, performance management, and training and development services. The company also provides Insperity Premier, a cloud-based human capital management platform that offers professional employer organization HR outsourcing solutions to its clients; people management services; and employer liability management services, as well as solutions for middle market. In addition, it offers MarketPlace, an e-commerce portal that offers a range of products and services; and Workforce Acceleration, a human capital management and payroll services solution; integrated payroll; benefits administration; HR administration and employee onboarding; time and attendance; performance management; reporting and analytics; recruiting; employment screening; retirement; and insurance services. The company was formerly known as Administaff, Inc. and changed its name to Insperity, Inc. in March 2011. Insperity, Inc. was founded in 1986 and is headquartered in Kingwood, Texas.

About Resources Connection

Resources Connection, Inc. provides consulting services to business customers under the Resources Global Professionals name in North America, Europe, and the Asia Pacific. The company offers services in the areas of transactions, including integration and divestitures, bankruptcy/restructuring, going public readiness and support, financial process optimization, and system implementation; and regulations, such as accounting regulations, internal audit and compliance, data privacy and security, healthcare compliance, and regulatory compliance. It provides transformations services comprising finance transformation, digital transformation, supply chain management, cloud migration, and data design and analytics. The company was formerly known as RC Transaction Corp. and changed its name to Resources Connection, Inc. in August 2000. Resources Connection, Inc. was founded in 1996 and is headquartered in Irvine, California.