Paychex, Inc. is a payroll processor for 605,000 businesses in the United States and Germany that have between 10 and 200 employees. It is on the short list of stocks with excellent investment characteristics that I have yet to cover on the site. Since 1990, PAYX stock has created enormous wealth for its shareholders by compounding at a rate of 21.2% annualized—on par with the compounding rates of Warren Buffett at his best. If you invested $10,000 into PAYX back then, you would have $1.6 million today.
The investment thesis for Paychex relies on two factors:
- Paychex has a remarkably stable customer base.
- Paychex has extreme profit margins that have stood the generational test of time.
Low PAYX Customer Turnover, Steady Profit Base
The nature of payroll processing is such that Paychex only has a customer turnover rate of 0.8% each year. This makes intuitive sense. If you are running … Read the rest of this article!