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Paychex Well Poised on Portfolio, Client Retention a Concern
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On Dec 12, we issued an updated research report on Paychex, Inc. (PAYX - Free Report) .
Strong domain expertise in human capital management solutions for payroll, HR, retirement, and insurance services has been a key growth factor for the company. This has increased the company’s clientele and driven revenues northward. Notably, the company’s top line is expected to witness a 5-year (2012-2017) CAGR of 7.2%.
Paychex stock has gained 14.0% year to date, outperforming the 11.3% rally of the industry it belongs to.
However we are apprehensive about a declining rate of client retention over the last few quarters, which might affect the company’s performance in the near term.
Key Factors Influencing the Stock
Paychex’s investments in product development, technology and focus on building its sales force to support revenue growth are tailwinds. Further, product launches and joint venture initiatives are likely to drive long-term growth. Also, its continuous share buybacks bode well for investors.
Notably, the company’s initiatives to enrich its product portfolio via acquisitions have also proved beneficial. With 14 acquisitions since its inception, Paychex has significantly improved its solutions suite and total addressable market (TAM). These have also acted as revenue boosters.
Moreover, the growth potential of the industry that Paychex caters to is high. Per the company, half of its total addressable market is still untapped.
However, the company is facing problems in retaining its customer base for the last few quarters, which is a major concern. During the last quarter, the company’s payroll client base remained flat due to a challenging demand environment and modest decline in retention. The client base was adversely affected by political uncertainty, which in turn impacted outsourcing-decision making in the mid-market.
Additionally, increasing competition from industry peers like Automatic Data Processing (ADP - Free Report) and Insperity (NSP - Free Report) is another key concern.
Long-term expected EPS growth rate for Intel is projected to be 8.42%.
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With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
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Paychex Well Poised on Portfolio, Client Retention a Concern
On Dec 12, we issued an updated research report on Paychex, Inc. (PAYX - Free Report) .
Strong domain expertise in human capital management solutions for payroll, HR, retirement, and insurance services has been a key growth factor for the company. This has increased the company’s clientele and driven revenues northward. Notably, the company’s top line is expected to witness a 5-year (2012-2017) CAGR of 7.2%.
Paychex stock has gained 14.0% year to date, outperforming the 11.3% rally of the industry it belongs to.
However we are apprehensive about a declining rate of client retention over the last few quarters, which might affect the company’s performance in the near term.
Key Factors Influencing the Stock
Paychex’s investments in product development, technology and focus on building its sales force to support revenue growth are tailwinds. Further, product launches and joint venture initiatives are likely to drive long-term growth. Also, its continuous share buybacks bode well for investors.
Notably, the company’s initiatives to enrich its product portfolio via acquisitions have also proved beneficial. With 14 acquisitions since its inception, Paychex has significantly improved its solutions suite and total addressable market (TAM). These have also acted as revenue boosters.
Paychex, Inc. Revenue (TTM)
Paychex, Inc. Revenue (TTM) | Paychex, Inc. Quote
Moreover, the growth potential of the industry that Paychex caters to is high. Per the company, half of its total addressable market is still untapped.
However, the company is facing problems in retaining its customer base for the last few quarters, which is a major concern. During the last quarter, the company’s payroll client base remained flat due to a challenging demand environment and modest decline in retention. The client base was adversely affected by political uncertainty, which in turn impacted outsourcing-decision making in the mid-market.
Additionally, increasing competition from industry peers like Automatic Data Processing (ADP - Free Report) and Insperity (NSP - Free Report) is another key concern.
Zacks Rank and Stock to Consider
Paychex has a Zacks Rank #3 (Hold).
A top-ranked stock worth considering in the sector is Intel Corporation (INTC - Free Report) , 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 is projected to be 8.42%.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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