What to Expect When Paychex (PAYX) Posts Latest Earnings Wednesday

NEW YORK (TheStreet) -- Shares of Paychex Inc  (PAYX) hung onto its gains, closing up 0.18% to $46.88 in the green on Tuesday, one day ahead of its fourth quarter earnings release before the market opens tomorrow.

Wall Street is expecting the company to earn 44 cents per share on revenue of $690.35 million, according to analysts polled by Thomson Reuters.

In the same quarter of last year, the company earned 40 cents per share on sales of $639 million.

Rochester, NY-based Paychex is a provider of integrated payroll, human resource, insurance, and benefits outsourcing solutions for small to medium sized businesses.

The company focuses on providing payroll and human resource services, as well as improving client service, and supplementing its growth through strategic acquisitions.

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, solid stock price performance, increase in net income, growth in earnings per share and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 22.6%. Since the same quarter one year prior, revenues slightly increased by 8.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the IT Services industry average. The net income increased by 5.8% when compared to the same quarter one year prior, going from $160.10 million to $169.40 million.
  • PAYCHEX INC's earnings per share improvement from the most recent quarter was slightly positive. 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 $1.71 versus $1.57 in the prior year. This year, the market expects an improvement in earnings ($1.85 versus $1.71).
  • PAYX has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.15 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • You can view the full analysis from the report here: PAYX Ratings Report

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