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For most investors, how much a stock's price changes over time is important. Not only can it impact your investment portfolio, but it can also help you compare investment results across sectors and industries.
The fear of missing out, or FOMO, also plays a factor in investing, especially with particular tech giants, as well as popular consumer-facing stocks.
What if you'd invested in Paychex (PAYX) ten years ago? It may not have been easy to hold on to PAYX for all that time, but if you did, how much would your investment be worth today?
Paychex's Business In-Depth
With that in mind, let's take a look at Paychex's main business drivers.
Paychex, Inc. is one of the leading providers of integrated human capital management (“HCM”) solutions for payroll, human resource (“HR”), retirement, and insurance services for small- to medium-sized businesses. The company was incorporated in Delaware in 1979.
The company’s payroll processing services include payroll processing, payroll tax administration services, employee payment servicesand regulatory compliance services. The company supports small-business companies through its core payroll, software-as-a-service (“SaaS”) Paychex Flex platform, and its SurePayroll ® SaaS-based products. The company’s SaaS solution through Paychex Flex Enterprise integrates payroll processing with HR management, employee benefits administration, time and labor management, applicant tracking, and onboarding solutions.
The company offers a suite of complementary Human Resource Services (“HRS”) products which include comprehensive HR outsourcing through Paychex HR Services; retirement services administration; insurance services; HR administration services, including time and attendance, benefit enrollment, recruiting, and onboarding;and other HR services and products.
Paychex’s wholly owned subsidiary, Paychex Advance LLC (“Paychex Advance”), offers a portfolio of services to the temporary staffing industry. This includes the purchasing of accounts receivable as a means of providing payroll funding to these clients.
As of May 31, 2020, Paychex served more than 670,000 payroll clients (inclusive of the Lessor acquisition). The company maintains its corporate headquarters in Rochester, New York, and serves clients throughout the United States and Europe. The company has one business segment. Its fiscal year ends on May 31.
Paychex operates under two broad categories — Total Service Revenue, and Interest on Funds Held for Clients. In fiscal 2020, Total Service Revenue made up 98% of total revenues and comprised two sub-segments: Management solutions (73.3% of Total Service Revenue) and professional employer organization (PEO) and insurance services (24.5% of Total Service Revenue). Interest on Funds Held for Clients accounted for the remaining 2.2% of fiscal 2020 total revenues.
Anyone can invest, but building a successful investment portfolio requires research, patience, and a little bit of risk. So, if you had invested in Paychex ten years ago, you're likely feeling pretty good about your investment today.
According to our calculations, a $1000 investment made in June 2011 would be worth $3,546.83, or a 254.68% gain, as of June 30, 2021. Investors should keep in mind that this return excludes dividends but includes price appreciation.
In comparison, the S&P 500 gained 228.27% and the price of gold went up 12.90% over the same time frame.
Analysts are forecasting more upside for PAYX too.
Paychex looks strong on the back of solid top-line growth and dominant position in the outsourcing market. Acquisitions have expanded the company's customer base and generated cost and revenue synergies. Further, the company strives to capitalize on the rising opportunities in the professional employer organization industry. Paychex has been consistently rewarding its shareholders through dividend payout and share repurchases, which boost investors' confidence and positively impact earnings per share. Due to these positives, the stock has outperformed in the past year. On the flip side, Paychex continues to witness rising expenses due to investment in sales, marketing, product development and supporting technology. PEO insurance costs and acquisitions have also added to the company's costs. Seasonality causes fluctuation in revenue.
Shares have gained 6.49% over the past four weeks and there have been 11 higher earnings estimate revisions for fiscal 2021 compared to none lower. The consensus estimate has moved up as well.
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Paychex, Inc. (PAYX) : Free Stock Analysis Report
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