Paychex Inc. (NASDAQ: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.
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 (NASDAQ:INTC) , NVIDIA Corporation (NASDAQ:NVDA) and Lam Research Corporation (NASDAQ: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.
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Paychex, Inc. (PAYX): Free Stock Analysis Report
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