PAYX - Embedded Expectations Analysis - 2019 01 08
Paychex, Inc. (PAYX:USA) currently trades near recent averages relative toUAFRS based (Uniform) Earnings, with a 21.3x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management appears concerned about growth, their value proposition, and client retention
Specifically, management appears concerned about client retention, and may be exaggerating the value proposition of their HR dashboard. Moreover, they may have concerns about their ability to meet EPS expectations, and sustain performance in terms of interest on funds held for clients. Finally, they may be concerned about their ability to meet expectations for total revenue growth, and effectively integrate Oasis
Paychex is a provider of integrated human capital management (HCM) solutions for payroll, benefits, human resource (HR), and insurance services for small- to medium-sized businesses. The company's portfolio of HCM and employee benefit-related services include: payroll processing services; payroll tax administration services; employee payment services; regulatory compliance services (new-hire reporting and garnishment processing); HR Solutions Administrative Services Organization; retirement services administration; HR administration services, including time and attendance; other HR services and products; business services; Professional Employer Organization services; and insurance services.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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