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Category: Stock Market and Paychex
Date: 4 October 2019 Stock Price: $83.76 We take a look at the 1st quarter earnings report of their 2020 fiscal year of Paychex a firm providing payroll and benefits solutions as well as insurance services.
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About Paychex
Paychex, Inc. (Nasdaq:PAYX) is a leading provider of integrated human capital management solutions for human resources, payroll, benefits, and insurance services. By combining its innovative software-as-aservice technology and mobility platform with dedicated, personal service, Paychex empowers small- and medium-sized business owners to focus on the growth and management of their business. Backed by more than 45 years of industry expertise, Paychex serves approximately 670,000 payroll clients as of May 31, 2019 across more than 100 locations in the U.S. and Europe, and pays one out of every 12 American private sector employees.
Overview of Paychex's latest earnings report
- Revenue: $992 million down from $862.8 million for the same quarter of the previous year)
- Revenue increased by 14.9% over the last 12 months
- Total expenses: $642.9 million (up from $542.5 million for the same quarter of the previous year)
- Total expenses increased by 18.5% over the last 12 months
- Net income: $264.2 million (up from $243.6 million for the same quarter of the previous year)
- Diluted earnings per share: $0.73 (up from $0.67 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 361.5 million (unchanged from 361.5 million for the same quarter of the previous year)
- Cash and cash equivalents: $586.4 million
- Cash and cash equivalents per share: $1.62
- Cash and cash equivalents makes up 1.9% of Paychex's market capital
- Cash and cash equivalents makes up 6.7% of Paychex's total assets
- Accounts receivable: $425.1 million
- Accounts receivable makes up 4.92% of Paychex's total assets
- Stockholders equity of Paychex: $2.591 billion
- Stockholders equity per share for Paychex's : $7.17
- So Paychex's is trading at 11.67 times it stockholders equity per share which is well outside the expected range of between 2 and 4 times most companies tend to trade at..
- Stockholders equity per share for Paychex's : $7.17
- Cash generated from operations: $294.8 million
- Cash generated from operations per share: $0.81
Paychex's management commentary on the results
Rochester, N.Y., (October 2, 2019) — Paychex, Inc. (“Paychex,” “we,” “our,” or “us”) (Nasdaq:PAYX) today announced total revenue of $992.0 million for the three months ended August 31, 2019 (the “first quarter”), an increase of 15% from $862.8 million for the same period last year. Oasis Outsourcing Group Holdings, L.P. (“Oasis”), acquired during December 2018, contributed a little less than 10% to the growth in total revenue compared to the same period last year. Net income increased 8% to $264.2 million and diluted earnings per share increased 9% to $0.73 per share for the first quarter. Adjusted net income and adjusted diluted earnings per share, both non-GAAP measures, each increased 6% to $257.6 million and $0.71 per share, respectively, for the first quarter.
Martin Mucci, President and Chief Executive Officer, commented, “We had a solid start to the fiscal year as we experienced good progress across our major business lines. Our human resource (“HR”) outsourcing services, time and attendance solutions, and retirement services performed well. In addition, demand for our professional employer organization (“PEO”) business continues to grow. We are committed to offering advanced solutions to help our clients thrive and meet their evolving business needs. During the quarter, we provided a set of enhancements to our solutions that will streamline payroll processes and support business owners and HR professionals as they work to optimize operations, comply with regulations, and drive productivity.”
Mucci added, “We are excited to be introducing several new solutions at the 2019 HR Technology Conference & Exposition® , which is currently taking place in Las Vegas. This includes wearable technology for tracking time worked, pay-on-demand, the next generation of the Paychex Flex® intelligence engine, and an API integration network. Our investments in technology focus on meeting the evolving needs of our clients and their employees by providing a more flexible, personalized work experience.”
Outlook
Our outlook for the fiscal year ending May 31, 2020 (“fiscal 2020”), is based upon current market expectations and economic conditions continuing with no significant changes. We have updated our guidance as a result of current business trends. Our updated guidance is as follows:
Management Solutions revenue is anticipated to grow approximately 5%;
PEO and Insurance Services revenue is anticipated to grow approximately 30%;
Other expense, net is anticipated to be in the range of $18 million to $20 million;
Net income and diluted earnings per share are both expected to grow approximately 9%; and
Adjusted net income and adjusted diluted earnings per share(1) are both expected to increase approximately 9%.
Other aspects of our guidance for fiscal 2020 remain unchanged from what we provided previously.
Martin Mucci, President and Chief Executive Officer, commented, “We had a solid start to the fiscal year as we experienced good progress across our major business lines. Our human resource (“HR”) outsourcing services, time and attendance solutions, and retirement services performed well. In addition, demand for our professional employer organization (“PEO”) business continues to grow. We are committed to offering advanced solutions to help our clients thrive and meet their evolving business needs. During the quarter, we provided a set of enhancements to our solutions that will streamline payroll processes and support business owners and HR professionals as they work to optimize operations, comply with regulations, and drive productivity.”
Mucci added, “We are excited to be introducing several new solutions at the 2019 HR Technology Conference & Exposition® , which is currently taking place in Las Vegas. This includes wearable technology for tracking time worked, pay-on-demand, the next generation of the Paychex Flex® intelligence engine, and an API integration network. Our investments in technology focus on meeting the evolving needs of our clients and their employees by providing a more flexible, personalized work experience.”
Outlook
Our outlook for the fiscal year ending May 31, 2020 (“fiscal 2020”), is based upon current market expectations and economic conditions continuing with no significant changes. We have updated our guidance as a result of current business trends. Our updated guidance is as follows:
Management Solutions revenue is anticipated to grow approximately 5%;
PEO and Insurance Services revenue is anticipated to grow approximately 30%;
Other expense, net is anticipated to be in the range of $18 million to $20 million;
Net income and diluted earnings per share are both expected to grow approximately 9%; and
Adjusted net income and adjusted diluted earnings per share(1) are both expected to increase approximately 9%.
Other aspects of our guidance for fiscal 2020 remain unchanged from what we provided previously.
Paychex (NASDAQ: PAYX) stock price history
The image below, obtained from Google, shows the stock price history of Paychex for the last 5 years. And it's been a very good time for Paychex stockholders. 5 years ago the stock was trading at around $43.40 a stock and its currently trading at $83.76 a stock. That's a very strong return of 92.9% provided to Paychex over the last 5 years. The stock of Paychex is trading at a lot closer to its 52 week high of $88.43 than it is to its 52 week low of $61.32 which to us is a clear indication that the short term sentiment and momentum of Paychex stock is very positive at this point in time.
Recent coverage of Paychex
The extract below shows some of the latest coverage on Bed Bath and Beyond obtained from TheStreet.com
Paychex (PAYX - Get Report) shares are set to rise Wednesday after the Rochester, N.Y., human-resources-services company reported fiscal-first-quarter results ahead of analyst estimates. For the quarter ended Aug. 31, Paychex earned 73 cents a share, or an adjusted 71 cents, against 67 cents in the year-earlier quarter. Revenue rose 15% to $992 million. Analysts surveyed by FactSet were expecting earnings of 68 cents a share on revenue of $991.1 million.
"Our human-resource-outsourcing services, time and attendance solutions, and retirement services performed well," Chief Executive Martin Mucci said in a statement. And "demand for our professional employer organization business continues to grow." The company plans to introduce several new services at the 2019 HR Technology Conference & Exposition in Las Vegas Oct. 1 through 4.
Read the full article here
Paychex (PAYX - Get Report) shares are set to rise Wednesday after the Rochester, N.Y., human-resources-services company reported fiscal-first-quarter results ahead of analyst estimates. For the quarter ended Aug. 31, Paychex earned 73 cents a share, or an adjusted 71 cents, against 67 cents in the year-earlier quarter. Revenue rose 15% to $992 million. Analysts surveyed by FactSet were expecting earnings of 68 cents a share on revenue of $991.1 million.
"Our human-resource-outsourcing services, time and attendance solutions, and retirement services performed well," Chief Executive Martin Mucci said in a statement. And "demand for our professional employer organization business continues to grow." The company plans to introduce several new services at the 2019 HR Technology Conference & Exposition in Las Vegas Oct. 1 through 4.
Read the full article here
Paychex (NASDAQ: PAYX) latest stock valuation
So what is Paychex (NASDAQ: PAYX) stock worth based on the release of their latest earnings report and outlook provided? Based on the group's latest earnings and their outlook provided our valuation model provides a target (full value) at $68.10 a stock. We therefore believe that the stock is overvalued.
We would not recommend long term fundamental or value investors buy into the stock at its current price but rather at levels at least 10% below our target (full value) price which in this case is $68.10. Thus we see a good entry point into Paychex's stock at $61.30 or below. Since the stock is trading at well above these levels we expect the price of Paychex to pull back in coming weeks and months to levels closer to our target price.
We would not recommend long term fundamental or value investors buy into the stock at its current price but rather at levels at least 10% below our target (full value) price which in this case is $68.10. Thus we see a good entry point into Paychex's stock at $61.30 or below. Since the stock is trading at well above these levels we expect the price of Paychex to pull back in coming weeks and months to levels closer to our target price.