Smart Stocks Investing

Paychex May Pay Off for Investors

Ockham Research submits:

Paychex Inc (PAYX) provides payroll and human resources services to small and medium sized business, and the tough employment market has obviously put a drag on results for the past year. The company serves more than half a million businesses around the globe, but experienced declining revenue recently due to small businesses not hiring and in some cases going out of business. However, many economists have become bullish on the labor market as the weather gets warmer and the economic recovery continues ahead, and it’s not just because of the temporary hiring of census workers (so they say). We make no predictions about the labor market, but if you agree with the optimistic outlook on jobs that is permeating much of Wall Street then Paychex would be a smart way to play this trend.

The company reported third quarter earnings on Wednesday afternoon that came in 1 cent ahead of consensus expectations with EPS of $.34 excluding one-time charges, which trails last year’s results by 2 cents per share. However, the stock is indicated slightly lower in after hours trading because revenue of $508 million was just shy of analysts’ expectations, falling 3.9% from a year ago. Their client base declined by 2.1% thus far in fiscal 2010. Given the continued bleed of jobs that occurred over the last year, it is not hard to imagine that comparisons to last year could have been much worse. Despite the decline in fundamentals, we think the stock represents attractive value for investors looking to take advantage of improving employment trends.

Complete Story »