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Here's How Much You'd Have If You Invested $1000 in Paychex a Decade Ago

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For most investors, how much a stock's price changes over time is important. Not only can it impact your investment portfolio, but it can also help you compare investment results across sectors and industries.

Another thing that can drive investing is the fear of missing out, or FOMO. This particularly applies to tech giants and popular consumer-facing stocks.

What if you'd invested in Paychex (PAYX - Free Report) ten years ago? It may not have been easy to hold on to PAYX for all that time, but if you did, how much would your investment be worth today?

Paychex's Business In-Depth

With that in mind, let's take a look at Paychex's main business drivers.

Paychex, Inc. is one of the leading providers of integrated human capital management (“HCM”) solutions for payroll, human resource (“HR”), retirement, and insurance services for small- to medium-sized businesses. The company was incorporated in Delaware in 1979.

The company’s payroll processing services include payroll processing, payroll tax administration services, employee payment servicesand regulatory compliance services. The company supports small-business companies through its core payroll, software-as-a-service (“SaaS”) Paychex Flex platform, and its SurePayroll ® SaaS-based products. The company’s SaaS solution through Paychex Flex Enterprise integrates payroll processing with HR management, employee benefits administration, time and labor management, applicant tracking, and onboarding solutions.

The company offers a suite of complementary Human Resource Services (“HRS”) products which include comprehensive HR outsourcing through Paychex HR Services; retirement services administration; insurance services; HR administration services, including time and attendance, benefit enrollment, recruiting, and onboarding;and other HR services and products.

Paychex’s wholly owned subsidiary, Paychex Advance LLC (“Paychex Advance”), offers a portfolio of services to the temporary staffing industry. This includes the purchasing of accounts receivable as a means of providing payroll funding to these clients.

As of May 31, 2020, Paychex served more than 670,000 payroll clients (inclusive of the Lessor acquisition). The company maintains its corporate headquarters in Rochester, New York, and serves clients throughout the United States and Europe. The company has one business segment. Its fiscal year ends on May 31.

Paychex operates under two broad categories — Total Service Revenue, and Interest on Funds Held for Clients. In fiscal 2020, Total Service Revenue made up 98% of total revenues and comprised two sub-segments: Management solutions (73.3% of Total Service Revenue) and professional employer organization (PEO) and insurance services (24.5% of Total Service Revenue). Interest on Funds Held for Clients accounted for the remaining 2.2% of fiscal 2020 total revenues.

Bottom Line

Anyone can invest, but building a successful investment portfolio requires research, patience, and a little bit of risk. So, if you had invested in Paychex ten years ago, you're likely feeling pretty good about your investment today.

A $1000 investment made in May 2011 would be worth $3,175.68, or a gain of 217.57%, as of May 7, 2021, according to our calculations. This return excludes dividends but includes price appreciation.

Compare this to the S&P 500's rally of 213.51% and gold's return of 17.04% over the same time frame.

Going forward, analysts are expecting more upside for PAYX.

Paychex looks strong on the back of solid top-line growth and dominant position in the outsourcing market. Acquisitions have expanded the company's customer base and generated cost and revenue synergies. Further, the company strives to capitalize on the rising opportunities in the professional employer organization industry. The company has been consistently rewarding its shareholders through dividend payout and share repurchases, which boost investors' confidence and positively impact earnings per share. Partly due to these positives, the stock has gained in the past year. On the flip side, Paychex continues to witness rising expenses due to investment in sales, marketing, product development and supporting technology. PEO insurance costs and acquisitions have also added to the company's costs. Seasonality causes fluctuation in revenue.

Over the past four weeks, shares have rallied 5.78%, and there have been 12 higher earnings estimate revisions in the past two months for fiscal 2021 compared to none lower. The consensus estimate has moved up as well.

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