Human resources outsourcing firm TriNet Group is today's pick for IBD 50 Stocks To Watch as the stock sits in a new base, spring-loaded to potentially leap to big gains.
The company provides a wide array of HR outsourcing services for small- and medium-sized businesses (SMBs) in the U.S. The Dublin, Calif.-based company has about 16,300 clients with worksite employees of nearly 365,000.
TriNet's suite of products includes services and software to help streamline workflows by connecting HR, benefits, employee engagement, payroll, and time and attendance. It offers access to a 401(k) plan, workers' compensation and employer practices liability insurance.
Stock To Watch: Revenue Breakdown
TriNet gets most of its total revenue from insurance services. Of $4.54 billion in revenue in 2021, $3.9 billion, or 86%, came from insurance services, while $639 million, or 14%, came from professional services.
The company's annual report for 2021 details how the company and overall HR outsourcing industry is facing continued headwinds as the speed of recovery from the Covid-19 pandemic varies for SMBs by industry.
This stock to watch could make a move when the company reports first-quarter earnings on April 26. Wall Street analysts expect earnings per share to rise 23% to $2.05, according to FactSet. That's a slowdown from an average growth pace of 89.2% over the past three quarters, according to IBD Stock Checkup, but still a pretty good clip.
For all of 2022, however, analysts see EPS declining 13% to $4.93.
Still, TriNet's growth potential appears to be vast. A presentation on its website notes that 61 people work for companies with 500 or fewer employees. Just 7% of the worksite employees who work for SMBs are served by professional employee organizations (PEOs) like TriNet. The overall field has more than 480 PEOs.
No. 3 In Its Industry Group
TriNet ranks No. 3 in its commercial services outsourcing group, according to Stock Checkup. The group itself sits at No. 83 out of IBD's 197 industry groups ranked by stock price performance. It's up from No. 103 three weeks ago and No. 113 six weeks ago.
The stock is forming a cup with handle base, putting it among growth stocks to watch. The pattern started forming on Nov. 15 when the stock peaked at 109.40 following its prior run-up, according to MarketSmith chart analysis. The buy point is at 103.46.
TriNet's earnings are due in less than two weeks. As with any stock near a buy point close to earnings releases, investors should use caution. Prices can make big swings up and down around earnings reports.
A positive sign in TriNet's chart is the 2.4% rally on the highest volume of the base on March 16. Such moves are signs of strong interest by institutional investors like mutual funds.
This isn't TriNet's first big-gain rodeo. From Aug. 10 to Nov. 15, this stock to watch ran up 24% to its 109.40 peak from a the 87.70 buy point of a cup base.
