Paychex (PAYX) has been another top performer in 2013, buoyed by growth in jobs numbers to eke out gains of more than 46% since the first trading day of the year. Paychex is one of the biggest names in the outsourced HR services business, providing around 550,000 small and medium-sized businesses with payroll processing. By hiring Paychex, business owners can avoid dealing with the bevy of tax and compliance minutiae that come with having employees.
Because Paychex's fortunes are tied to the health of the job market (it gets paid by having more accounts, after all), the firm faced a real problem heading into the soft economy of the Great Recession. To combat that, PAYX expanded its role, pulling out its massive customer Rolodex to offer other ancillary HR services such as 401(k) management and worker's comp insurance. Adding new services onto its menu gives Paychex another big revenue driver from its existing client base.
Going forward, the firm has a lot to gain from upward mobility in interest rates: historically, Paychex has earned considerable profits from its float portfolio -- the huge amount of cash it holds between the time employers deposit it and employees cash their paychecks. While extremely low interest rates have hurt PAYX's float income, there's a huge revenue stream waiting to be unlocked when rates perk back up. Paychex is another Rocket Stock name that's heading into 2014 with strong momentum in tow.
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