Paychex Inc. PAYX seems to be well set on the growth trajectory. This provider of payroll and integrated human resource and employee benefits outsourcing solutions for small- to medium-sized businesses in the United States carries a Zacks Rank #2 (Buy).
Paychex’s shares reached a 52-week high of $69.14 on Dec 8, 2017, eventually closing at $69.01. Notably, the company’s shares have surged 13.4% on a year-to-date basis, outperforming the 8.0% gain of the industry to which it belongs to.
The outperformance of the stock has been backed by the company’s impressive top line that witnessed 5-year (2012-2017) CAGR of 7.2%. Higher revenues resulted in better margins and profitability for the company, which has boosted investors’ confidence.
Notably, deep domain expertise in human capital management solutions for payroll, HR, retirement, and insurance services, has boosted its customer base, thus driving revenues northward.
Inorganic Growth Boosts Product Suite
With 14 acquisitions since its inception, Paychex has significantly improved its solutions suite and total addressable market (TAM). These have acted as revenue boosters.
The latest addition of HR Outsourcing Holdings, Inc. (HROI) has exposed it to the fast growing professional employer organization (PEO) industry. We believe the acquisition is a strategic fit for Paychex as PEO services are turning into a preferred choice over in-house HR management departments.
Paychex, Inc. Revenue (TTM)
Paychex, Inc. Revenue (TTM) | Paychex, Inc. Quote
Other Strategic Initiatives
The industry in which Paychex operates has huge growth potential. The company mainly focuses on small- and mid-sized businesses looking for HR solutions. Paychex has nearly 605,000 payroll clients but the market is still highly untapped. Per the company, there are about 12 million businesses in the United States under its total addressable market, half of which are still unexploited.
Additionally, the company’s investments in product development, technology and focus on building its sales force to support revenue growth boost optimism. Further, product launches and other joint venture initiatives are likely to drive long-term growth. Also, its continuous share buybacks bode well for investors.
Other Stocks to Consider
Other top-ranked stocks worth considering in the sector include Intel Corporation INTC, NVIDIA Corporation NVDA and Lam Research Corporation LRCX, all sporting a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here.
Long-term expected EPS growth rate for Intel, NVIDIA and Lam Research is projected to be of 8.42%, 10.25% and 14.85%, respectively.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Intel Corporation (INTC) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Lam Research Corporation (LRCX) : Free Stock Analysis Report
Paychex, Inc. (PAYX) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research