Home > Should you buy Paychex stocks after beating earnings for ten consecutive quarters?

Should you buy Paychex stocks after beating earnings for ten consecutive quarters?

Paychex reported its Q2 FY2022 results yesterday – total revenue at $1.1 billion, $440.3 million in operating income, and $0.91 adjusted diluted EPS. 

Paychex (NASDAQ:PAYX) is an American IT company operating in the data processing and outsourced services industry. It offers insurance, benefits, payroll, and human resources services to businesses in the US and Europe, and it was founded in 1971. It pays one out of every 12 American private-sector employees and serves over 700,000 payroll clients.

The company reported its Q2 FY2022 results yesterday, and once again, it has beaten Wall Street's expectations. It reported higher EPS and revenues for ten consecutive quarters and optimistic forward guidance.

Paychex is a dividend-paying company with a dividend payout ratio of 72.52%. Moreover, the five-year dividend growth rate is 8.12%, and it has increased its payments to shareholders in the past 11 years.  

On top of hefty dividends received quarterly, Paychex shareholders also benefited from the stock price appreciation – Paychex's stock price is up +43.17% YTD.

Q2 FY2022 highlights

Paychex reported much better than expected results for the second quarter of the 2022 fiscal year. Revenues are up 13%, and diluted earnings per share grew by 21%. Moreover, the company has raised its business outlook for the year.

The company's financial position looks strong too. As of November 30, 2021, Paychex had $1.1 billion in cash, restricted cash, and total corporate investments. Moreover, cash flow from operations was $555.4 million for the first six months of the fiscal year, supporting the $476.4 million paid cumulative dividends over the period.

Paychex raises its business outlook for the year

Paychex updated its guidance for the fiscal year and raised its business outlook. As such, total revenue is anticipated to grow above 10%, and adjusted diluted earnings per share are now expected to grow in the range of 18% to 20%.

The company operates with a gross profit margin ratio of 69.66%, higher than the sector median by 40.95%. While the gross profit margin is much higher than the sector median, the EBIT margin for the last twelve months is even more impressive – higher than the sector median by 314.22%.

To sum up, Paychex delivered better than expected results for the tenth consecutive quarter. At this pace, investors should expect both stock price appreciation, as well as a hefty dividend.

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