Has Paychex Inc (NASDAQ:PAYX) Improved Earnings Growth In Recent Times?
Investors with a long-term horizong may find it valuable to assess Paychex Inc’s (NASDAQ:PAYX) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Paychex is currently performing. See our latest analysis for Paychex
How Well Did PAYX Perform?
I use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This technique enables me to assess many different companies on a more comparable basis, using new information. For Paychex, its most recent trailing-twelve-month earnings is $842.6M, which, in comparison to the previous year’s figure, has grown by a relatively muted 8.30%. Given that these values are somewhat myopic, I’ve created an annualized five-year figure for Paychex’s net income, which stands at $651.1M. This means that, generally, Paychex has been able to steadily raise its profits over the last few years as well.
How has it been able to do this? Let’s see if it is merely a result of an industry uplift, or if Paychex has seen some company-specific growth. In the last couple of years, Paychex grew its bottom line faster than revenue by successfully controlling its costs. This has caused a margin expansion and profitability over time. Scanning growth from a sector-level, the US it industry has been growing, albeit, at a muted single-digit rate of 5.40% in the prior year, and a substantial 12.46% over the past five years. This suggests that any uplift the industry is deriving benefit from, Paychex is able to amplify this to its advantage.
What does this mean?
Paychex’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Paychex to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for PAYX’s future growth? Take a look at our free research report of analyst consensus for PAYX’s outlook.
2. Financial Health: Is PAYX’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 November 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
