Paychex Inc.
provides computerized payroll-accounting services, salary deposit services,
automatic payroll tax payment and tax return filing services and human resource
products and services to approximately 570,000 small and medium sized
businesses. The company has earned a
25%+ return on equity over the last 10 years and has grown profits and
dividends 8-13% in the same time period.
While PAYX is somewhat sensitive to the economy, it should continue to
provide above average returns as a result of:
(1) rising
number of checks processed as well as an increase in revenue per check,
(2)
acquisitions,
(3) increasing
demand for health and benefits offerings,
(4) geographic
expansion,
(5) an R&D
effort designed to expand product offerings.
Negatives:
(1) a weak
economy negatively impacts the growth of its client base,
(2) low interest
rates are impacting ‘interest on funds held for clients’.
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio
Since 2004
Ind Ave 1.9 11* 39 NA
Debt/ EPS Down Net Value Line
Equity ROE Since 2004 Margin
Rating
Ind Ave 19 20 NA 12 NA
*over one half of the companies
in PAYX ’s industry don’t pay a
dividend
Chart
Note:
PAYX stock made good progress off its March 2009 low, quickly surpassing the downtrend
off its August 2007 high (straight red line) and the November 2008 trading high
(green line). Long term, the stock is in
an uptrend (blue lines). Intermediate
term, it is in an uptrend (purple lines).
The wiggly red line is the 50 day moving average. The Dividend Growth Portfolio owns a 75% position
in PAYX. The upper boundary of its Buy
Value Range is $24; the lower boundary of its Sell Half Range is $50.
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