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Revenue Growth Aids Paychex (PAYX) Amid High Talent Cost

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Paychex, Inc. (PAYX - Free Report) looks strong on the back of solid top-line growth and strong shareholder-friendly measures.

The company recently reported better-than-expected fourth-quarter fiscal 2021 results. Adjusted earnings of 72 cents per share beat the Zacks Consensus Estimate by 7.5% and increased 18% on a year-over-year basis. Total revenues of $1.03 billion beat the consensus mark by 5% and increased 12.5% year over year.

Notably, the stock has gained 39.4% in the past year compared with 34.7% rally of the industry it belongs to.

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Revenue Growth & Solid Shareholder-Friendly Measures are Positives

Revenue growth is an important metric for any company as it is a vital part of growth projections and instrumental in strategic decision-making. Also, revenue growth is essential to justify the fixed and variable expenses incurred to operate a business.  Paychex's solid business model, diversified products and services, and strategic acquisitions have boosted top-line growth.

Paychex puts consistent efforts to reward its shareholders through dividends. The company paid out dividends of $889.4 million, $826.8 million and $739.7 million, respectively, in fiscal 2020, 2019 and 2018. Such initiatives not only instil investors’ confidence but also positively impact earnings per share.

Rising Talent Cost is a Hurdle

The outsourcing industry is labor intensive and heavily dependent on foreign talent. Rising talent costs due to competition could curb the industry’s growth. Paychex, being one of the companies in the industry, is likely to get affected.

Zacks Rank and Stocks to Consider

Paychex currently carries a Zacks Rank #3 (Hold).

Investor interested in the broader Zacks Business Services sector can also consider stocks like The Interpublic Group of Companies, Inc. (IPG - Free Report) , Cross Country Healthcare (CCRN - Free Report) and Charles River Associates (CRAI - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

The long-term expected earnings per share (three to five years) growth rate for The Interpublic Group of Companies, Cross Country Healthcare and Charles River is pegged at 10.2%, 10.5% and 15.5%, respectively.

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