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Here's Why You Should Retain Paychex (PAYX) Stock For Now

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Paychex, Inc.’s (PAYX - Free Report) shares have charted a solid trajectory in recent times, appreciating 30.3% over the past year, ahead of the 26.7% rally of the industry it belongs to and 27.2% rise of the Zacks S&P 500 composite.

Paychex, Inc. Price

What’s Supporting the Rally?

Paychex has grown meaningfully over the years by providing industry-leading service and technology solutions to its clients and their employees. Its solid business model, diversified products and services, and strategic acquisitions have boosted top-line growth. Revenues witnessed a five-year (2016-2021) CAGR of 6.5%. Higher revenues will expand margins and increase profitability in the long run.

The company’s cash and cash equivalent balance of $1.2 billion at the end of the first quarter of fiscal 2022 was above the total debt level of $804 million, underscoring that the company has enough cash to meet its debt burden.

Paychex puts in consistent efforts to reward its shareholders through dividends and share repurchases. The company paid dividends of $889.4 million, $826.8 million and $739.7 million, and repurchased shares worth $171.9 million, $56.9 million and $143.1 million, respectively, in fiscal 2020, 2019 and 2018.

Hurdles to Counter

Paychex is seeing an increase in expenses as it continues to invest in sales, marketing, product development and supporting technology. Total expenses of $2.58 billion increased 7% year over year in fiscal 2020. These expenses increased 15% year over year in fiscal 2019, 10% in fiscal 2018 and 6% in fiscal 2017.

Zacks Rank and Stocks to Consider

Paychex currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Zacks Business Services sector are Avis Budget (CAR - Free Report) , Cross Country Healthcare, Inc. (CCRN - Free Report) and CRA International, Inc. (CRAI - Free Report) .

Avis Budget has an expected earnings growth rate of around 453.5% for the current year. CAR has a trailing four-quarter earnings surprise of 76.9%, on average.

Avis Budget’s shares have surged 478.6% in the past year. CAR has a long-term earnings growth of 18.8%. CAR sports a Zacks Rank #1.

Cross Country Healthcare has an expected earnings growth rate of around 500% for the current year. CCRN has a trailing four-quarter earnings surprise of 75%, on average.

Cross Country Healthcare’s shares have surged 168.6% in the past year. CCRN has a long-term earnings growth of 21.5%. CCRN carries a Zacks Rank #1.

CRA International has an expected earnings growth rate of around 61.2% for the current year. CRAI has a trailing four-quarter earnings surprise of 51%, on average.

CRA International’s shares have surged 77.9% in the past year. CRAI has a long-term earnings growth of 15.5%. The stock carries a Zacks Rank #2 (Buy).