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One of Intuit's competitors is joining it on our list today.
PAYX) is the second-largest payroll outsourcer in the world, taking care of the payroll paperwork for 500,000 small and medium business clients all over the globe. While the uneasy recovery in the jobs market has acted as a big black cloud over PAYX in the last five years, the firm is making it clear that its revenues are recovering faster than unemployment data dictate.
In the past, Paychex has traditionally been a payroll company, providing services for business owners who wanted to simplify the process of getting employees paid and taxes sorted. But PAYX has unlocked a profitable niche in the HR outsourcing business, upselling everything from 401(k) record-keeping to workers' compensation administration to its existing customer Rolodex. As with Intuit, the high cost of switching and hard-to-find side services makes PAYX's customers extremely sticky.
One key revenue source for payroll outsourcers is float income, the interest income it earns by holding clients' cash until employees withdraw it. Obviously, record-low interest rates have hammered Paychex's ability to earn money on its massive float. But with low float revenues already priced into shares, any buoyancy in interest rates means that there's a sudden, big source of free money on tap down the road.
Right now, Paychex's short interest ratio sits at 12.84.
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