TriNet Group, Inc. (TNET) provides small- and medium-sized businesses (SMBs) with full-service HR solutions tailored by industry. The company offers access to human capital expertise, benefits, risk mitigation and compliance, payroll and real-time technology. TNET operates primarily through two segments – Professional service and Insurance service.

Coronavirus-induced lockdowns worldwide have spurred the adoption of work-from-home models, resulting in operational challenges for SMBs seeking to  integrate HR solutions with essential business systems directly.

As a result, TNET has fared-well in 2020, with decent revenue growth. In the third quarter, the company posted a top-line of $975 million, an increase of 1% year-over-year. The average worksite employees (WSEs) came in at 317,737. However, TNET posted an adjusted EPS of $0.56, compared to the year-ago value of $0.81.

The stock has gained nearly 36% in the past year. This impressive performance and its potential upside based on several factors have helped it earn a “Buy” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates TNET:

Trade Grade: A

TNET is currently trading below its 50-day moving average of $79.30, but higher than its 200-day moving average of $65.32, indicating that the stock is in a moderate uptrend. However, the stock’s 8.7% return over the past three months reflect short-term bullishness.

In November, TNET announced the release of TriNet Mobile v7.5. This latest version of the TriNet app includes advanced features, giving the user greater flexibility to manage TriNet-sponsored benefits and flexible spending account claims, with improved account security. Designed for today’s increasingly distributed workforce, the app connects, engages, and empowers SMBs and their employees to access real-time information on paycheck history, benefits, time-off requests and flexible spending accounts, while its multi-factor authentication improves secure access for users.

Buy & Hold Grade: B

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, TNET is well positioned. The stock is currently trading just 10.3% below its 52-week high of $85.08.

Looking at the past five years, the stock has returned more than 420% on the back of its resilient customer base and innovative service platform. Additionally, TNET’s top-line and EPS have increased at a CAGR of 7.2% and 31.8%, respectively, over the past three years.

TNET recently won the 2021 “Best of Customer Support” award from TrustRadius. The award highlights companies that have gone above and beyond to provide their customers with outstanding customer service in 2020.

In words of CEO Burton Goldfield, “Our mission at TriNet is to provide our 18,000-plus small- and medium-size business customers with a full-service HR solution that allows them to focus on growing their business. Now, more than ever, these businesses need our support, and we are both excited and motivated to continue to service our customers into 2021 and beyond.”

Peer Grade: C

TNET is currently rated #18 of 56 stocks in the Outsourcing – Business Services group. Other popular stocks in this group are Bunzl plc (BZLFY), Genpact Limited (G) and Unifirst Corporation (UNF). TNET has gained nearly 19% in the past six months. While G has lost 3%, BZLFY and UNF have returned 17.9% and 17.7%, respectively, over this period.

Industry Rank: B

TNET is part of the StockNews.com Outsourcing – Business Services industry, which is ranked #46 of  123 industries.

Outsourcing is a practice in which one company pays another company to carry out certain business processes in which it  specializes. The objective of such arrangements  is to work more efficiently and more cost-effectively. Hence, the outsourcing industry has been benefiting from increasing demand for expertise over the past several years. This trend is expected to continue in the future as well.

Overall POWR Rating: B (Buy)

Overall, TNET is rated a Buy due to its impressive financial performance, underlying industry strength, innovative service models as determined by the four components of our overall POWR Rating.

Bottom Line

Though the outsourcing industry is growing at an enviable pace, concerns about  reshoring jobs may escalate when the global economy returns to the old normal. On the other hand, the remote working culture amplified the global dependence on business service providers as corporates have been witnessing improved productivity and business efficiency.

TNET helps SMBs gain new perspectives that elevate their workplace. Hence, we think TNET is well-positioned to benefit from its large-scale operations and has potential to grow even further based on its continued business growth, evolving technology platform, and favorable earnings and revenue outlook.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is also good  for TNET. Wall Street analysts expect TNET’s full-year 2020 revenues and EPS to grow 10.8% and 27.6%, respectively. This outlook should keep TNET’s price momentum this year.

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TNET shares were trading at $77.15 per share on Thursday afternoon, up $2.24 (+2.99%). Year-to-date, TNET has declined -4.28%, versus a 1.00% rise in the benchmark S&P 500 index during the same period.

About the Author: Sidharath Gupta

Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...

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