Paychex: An Expensive Cash Cow

The payroll and human resources outsourcing business is on that I've had my eye on for a long time. The reason being that the business model is quite sticky for customers because employees want to know that their paychecks are correct and on time.

Paychex (PAYX) is a well-established business in this space with experience dating back to its founding in 1971.  Paychex focuses on small and mid-sized companies with solutions for payroll, human resources and benefits outsourcing.  As companies look for ways to curtail costs in a bid to become more efficient with their own cash, Paychex is well-positioned to continue to serve that market.  

There's still plenty of growth opportunities in this fragmented market as management estimates the total addressable businesses that Paychex could server at 10 million.  At the end of Q1 2020, Paychex had 670,000 clients.

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