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Paychex (PAYX) Stock Up 23.6% in a Year: What's Behind It?

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Shares of Paychex, Inc. (PAYX - Free Report) have surged 23.6% over the past year, outperforming 7.8% growth of the industry it belongs to. The Zacks S&P 500 composite declined 1.7% in the same time frame.

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Let’s delve deeper into factors that have contributed to the company’s price performance.

Dividend Hike

Paychex’s board of directors has recently declared a dividend hike of 20%, thereby raising the quarterly cash dividend from 66 cents per share to 79 cents. The dividend will be paid on May 26, 2022, to shareholders of record on May 12, 2022.

Notably, Paychex puts consistent efforts to reward its shareholders through dividends and share repurchases. The company paid dividends of $908.7 million, $889.4 million and $826.8 million, and repurchased shares worth $155.7 million, $171.9 million and $56.9 million, respectively, in fiscal 2021, 2020 and 2019. Such moves indicate the company’s commitment to create value for shareholders and underline its confidence in its business. These initiatives not only instill investor confidence but also positively impact the company’s earnings per share.

Consecutive Earnings & Revenue Beat

Paychex reported better-than-expected earnings and revenue performance in the last four quarters. Strength across Management Solutions’, and Professional employer organization and Insurance Solutions’ revenues should have aided the company’s top-line performance.

Raised 2022 Guidance

For fiscal 2022, total revenues are now expected to register 12-13% growth compared with the prior expectation of 10-11%. Adjusted earnings per share are now expected to register 22.5-23% growth compared with the prior expectation of 18-20%.

Management Solutions’ revenues are now expected to grow 12-13% compared with the prior expectation of 10-11%. PEO and Insurance Solutions’ revenues are now expected to grow 13-14% compared with the prior expectation of 10-12%.

Adjusted operating margin is expected to be almost 40% compared with the prior expectation of 39-40%. Adjusted EBITDA margin is now expected to be nearly 44-45% compared with the prior expectation of 44%.

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 other better-ranked stocks in the broader Business Services sector that investors can consider are Cross Country Healthcare (CCRN - Free Report) , NV5 Global (NVEE - Free Report) and Clean Harbors (CLH - Free Report) . Cross Country Healthcare sports a Zacks Rank #1, NV5 Global and Clean Harbors carries a Zack Rank #2..

Cross Country Healthcare has an expected earnings growth rate of 35.3% for the current year. It has a trailing four-quarter earnings surprise of 29.2%, on average.

Cross Country Healthcare has a long-term earnings growth of 6.9%.

NV5 Global has an expected earnings growth rate of 6.1% for the current year. It delivered a trailing four-quarter earnings surprise of 23.2%, on average.

NV5 Global’s shares have surged 32.5% in the past year. The company has a long-term earnings growth of 14.2%.

Clean Harbors has an expected earnings growth rate of 22.8% for the current year. The company has a trailing four-quarter earnings surprise of 35.8%, on average.

Clean Harbors’ shares have surged 2.8% in the past year.

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