雅虎香港財經 Reasons to Hold Paychex (PAYX) Stock in Your Portfolio
Paychex, Inc. PAYX has had an impressive run over the past year, appreciating 15%.
The company has an expected long-term (three to five years) EPS growth rate of 7.3%. Its earnings for fiscal 2024 and 2025 are anticipated to grow 10.3% and 5.6%, respectively, year over year.
Paychex, Inc. Price
Paychex, Inc. price | Paychex, Inc. Quote
Factors That Bode Well
Paychex has seen significant growth by providing industry-leading service and technology solutions to clients and employees. This growth is driven by a robust business model, diverse offerings and strategic acquisitions.
Revenues maintained an impressive 8.2% CAGR from 2018 to 2023, with expectations of margin expansion and increased long-term profitability. We expect the company’s revenues to register year-over-year growth of 5.5%, 4.8% and 4.9% in fiscal 2024, 2025 and 2026, respectively. Net income is expected to grow 9.7%, 4.4% and 6.8%, respectively, in fiscal 2024, 2025 and 2026.
PAYX consistently strives to reward its shareholders through dividends and share repurchases. In fiscal years 2023, 2022 and 2021, the company paid out dividends totaling $1.17 billion, $1 billion and $0.91 billion, respectively. Moreover, it repurchased shares worth $0.15 billion, $0.16 billion and $0.17 billion in fiscal years 2022, 2021 and 2020, respectively. These initiatives not only bolster investor confidence but also positively impact earnings per share.
PAYX aims to cater to clients' HR and payroll needs with a versatile service portfolio. Offering a diverse range of services, clients can tailor their choices, including features like same-day ACH and pay-on-demand for added flexibility. By utilizing base payroll processing data, the company extends comprehensive outsourcing solutions.
Some Risks
Total expenses rose 3% in the third quarter, mainly attributed to higher compensation costs due to the increased average headcount and wage rates. Moreover, there was an uptick in PEO direct insurance costs due to the growth in average worksite employees and PEO insurance revenues. Total expenses jumped 7%, 7% and 1% year over year in fiscal 2023, 2022 and 2021, respectively. As a result, the company's bottom line is expected to remain under pressure.
Paychex’s current ratio (a measure of liquidity) stood at 1.24 at the end of the third quarter of fiscal 2024, lower than 1.28 at the end of the year-ago fiscal quarter. A decreasing current ratio does not bode well.
Zacks Rank and Stocks to Consider
PAYX currently carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the broader Zacks Business Services sector are Charles River Associates CRAI and DocuSign (DOCU). Each stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CRAI has a long-term earnings growth expectation of 16%.
The company has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in three of the last four quarters and missed once. The average beat is 19.07%. Shares of CRAI have risen 45.6% in the past three months.
DOCU has a long-term earnings growth expectation of 13.3%.
The company delivered an earnings surprise of 23.7%, on average, surpassing the Zacks Consensus Estimate in each of the trailing four quarters. Shares of DocuSign have risen 8% in the past three months.
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