NEW YORK (TheStreet) -- Shares of Paychex, Inc. (PAYX - Get Report) are dropping -3.13% to $40.89 after Credit Suisse (CS) said the company's fiscal 2015 outlook shows improvement in service revenue growth, but fairly muted net income growth of 6% to 8% versus fiscal 2014's 10% growth.
Paychex reported fourth quarter 2014 earnings of 40 cents per share on revenue of $617.2 million at the close on Tuesday, which was in line with expectations of analysts surveyed by FactSet.
Separately, TheStreet Ratings team rates PAYCHEX INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PAYCHEX INC (PAYX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 16.3%. Since the same quarter one year prior, revenues slightly increased by 7.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- PAYCHEX INC has improved earnings per share by 10.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PAYCHEX INC increased its bottom line by earning $1.57 versus $1.51 in the prior year. This year, the market expects an improvement in earnings ($1.71 versus $1.57).
- The net income growth from the same quarter one year ago has significantly exceeded that of the IT Services industry average, but is less than that of the S&P 500. The net income increased by 10.8% when compared to the same quarter one year prior, going from $144.50 million to $160.10 million.
- The gross profit margin for PAYCHEX INC is currently very high, coming in at 76.31%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 25.15% significantly outperformed against the industry average.
- Net operating cash flow has slightly increased to $305.60 million or 8.98% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -19.48%.
- You can view the full analysis from the report here: PAYX Ratings Report