NEW YORK ( TheStreet) -- Insperity (NYSE: NSP) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins.

Highlights from the ratings report include:
  • INSPERITY INC has improved earnings per share by 25.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, INSPERITY INC increased its bottom line by earning $0.87 versus $0.65 in the prior year. This year, the market expects an improvement in earnings ($1.22 versus $0.87).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Professional Services industry average. The net income increased by 31.7% when compared to the same quarter one year prior, rising from $5.12 million to $6.74 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Professional Services industry and the overall market on the basis of return on equity, INSPERITY INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The gross profit margin for INSPERITY INC is rather low; currently it is at 17.70%. Regardless of NSP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.40% trails the industry average.
  • NSP has underperformed the S&P 500 Index, declining 17.99% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

Administaff, Inc., a professional employer organization (PEO), provides various personnel management services in the United States. The company has a P/E ratio of 17.3, below the average diversified services industry P/E ratio of 17.4 and below the S&P 500 P/E ratio of 17.7. Insperity has a market cap of $534.4 million and is part of the services sector and diversified services industry. Shares are down 31.1% year to date as of the close of trading on Monday.

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