Asset Structure Analysis
Paychex’ s total assets were $10.5 billion as of May 31, 2023, up from $9.6 billion as of May 31, 2022.
Goodwill was $1.83 billion as of May 31, 2023, making up 17.4% of total assets.
Total current assets were $7.5 billion as of May 31, 2023, constituting 71.4% of total assets.
Among total current assets, funds held for clients were $4.1 billion.
Liquidity and Solvency
Total current liabilities were $5.8 billion as of May 31, 2023, in which the amount of client fund obligations were $4.3 billion.
The current ratio was about 1.3 for fiscal 2023.
Total liabilities were $7 billion as of May 31, 2023.
The debt ratio was approximately 66.7% for fiscal 2023.
Considering the size of goodwill, the company’s debt ratio is relatively high, but Paychex’ s liquidity is very sufficient and debt pressure is very slight.
The company’s cash flow is very strong, which can cover the debt.
Net cash provided by operating activities was $1.7 billion, $1.5 billion and $1.26 billion in fiscal 2023, 2022 and 2021, respectively.
Profitability Analysis
Paychex’ s total revenues were $5 billion, $4.6 billion and $4 billion for fiscal 2023, 2022 and 2021, respectively.
The total revenues in fiscal 2023 were up 8.7% year on year.
The total revenues in fiscal 2022 were up 15% year on year.
Net income was $1.56 billion, $1.4 billion and $1.1 billion in fiscal 2023, 2022 and 2021, respectively.
Paychex’ s net profit margin was 31.2%, 30.4% and 27.5% in fiscal 2023, 2022 and 2021, respectively.
Total stockholders’ equity was $3.5 billion and $3.1 billion in fiscal 2023 and 2022, respectively.
The return on equity was 44.6% and 45.2% for fiscal 2023 and 2022, respectively.
Cash Flow Analysis
Net cash provided by operating activities was $1.7 billion, $1.5 billion and $1.26 billion in fiscal 2023, 2022 and 2021, respectively.
The company’s capital expenditure is very small, and cash flow could be returned to shareholders.
Dividends paid were $1.18 billion, $1 billion and $908.7 million in fiscal 2023, 2022 and 2021, respectively.
Repurchases of common stock was $0, $145.2 billion and $155.7 billion in fiscal 2023, 2022 and 2021, respectively.
Paychex’ s operating performance for the quarterly period ended February 29, 2024
Paychex’ s total revenues were $4 billion and $3.78 billion for the nine months ended February 29, 2024 and the nine months ended February 28, 2023, respectively.
Net income was $1.3 billion and $1.2 billion for the nine months ended February 29, 2024 and the nine months ended February 28, 2023, respectively.
Conclusion
This is an excellent company. Paychex’ s profitability is very strong with a stream of cash flow.
We reckon that Paychex’ s range of reasonable valuation is $25 billion to $30 billion, while the company’s market capitalization is $42.12 billion, which is equivalent to $116.97 per share.
Disclaimer: The content is for reference only and does not constitute investment advice.
Introduction
We are a leading provider of integrated human capital management (“HCM”) solutions for human resources (“HR”), payroll, benefits, and insurance for small- to medium-sized businesses and their employees across the United States (“U.S.”) and parts of Europe. We offer a comprehensive portfolio of HCM technology and HR advisory solutions that help our clients address the evolving challenges of HR.
We support our small-business clients, reducing the complexity and risk of running their own payroll, while ensuring greater accuracy with up-to-date tax rates and regulatory information. Clients may choose to have our support team handle everything for them, or process payroll themselves utilizing our proprietary, robust Paychex Flex® and SurePayroll® SaaS-based solutions. Our medium-sized clients generally have more complex payroll and employee benefit needs, though with the environment of increasing regulations, we believe the need for HR outsourcing services has been moving down-market. Any of our clients on Paychex Flex can opt for the integrated suite of HCM solutions, which allows clients to choose the service and software solutions that will meet the needs of their business.
Our portfolio of technology, HR advisory, and employee benefits-related solutions is disaggregated into two categories, (1) Management Solutions and (2) professional employer organization (“PEO”) and Insurance Solutions.
(from Paychex’ s form 10k )
