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It is such a fabulous day for the market since 2008, there are a few reports which are better than expected in stocks, that should go higher, that’s what happened with red head, after the close, but look at paychecks in the nation’s second largest payroll processor with Assad lining human capital management services, this morning paychecks delivered some robust numbers in line or race with higher than expected revenue up nine percent, your viewer is even better.
The company raises full-year guidance dramatically and this is the stock pop about four percent on the headline news is trading up to sixty three dollars and fifty cents right before the opening, but then management started taking it in those questions on the conference call, it’s not cut slam give me up, all the games only closing down 51 cents point, the biggest day of the year, a biggest day of tenders, what happened here?
I didn’t see anything alarming on that call, this was a consistent quarter from one company of thrives, an exactly kind of environment where we have strong job growth and rising interest rates, so do the market make a mistake or is there anything I’m missing?
Let’s take it with martim, you see it is the CEO of paychecks, learn more about the quarter and get some insight, the state of the economy Marty, welcome back to the show, thanks Jim, good to be here, Marty, is it not enough to be able to do nine percent, you have the usual one to two percent growth.
Are these analysts looking for a breakout in growth? Because there’s a huge number of new small medium-sized businesses that are supposed to be starting. I think this third quarter tax reform, we had some one-time items on the expense side, we had some one-time items on positive from the tax perspective.
I think there was probably some confusion in the quarter, we also said that we were going to invest some of less than half of the tax reform benefit to us over the next year or so to generate more revenue.
I think maybe the models are being adjusted or something, I’m not sure what happened, it was a solid quarter for us, do you think it’s baby, you gave that one example of how much funds you had for the four available for feds funds rate and you said 3.9 billion in the May quarter and did 4.3 billion, this one is maybe what people expected.
I’m sorry it was down, it was a little bit from last year, do you think the people were bothered by that? you know I don’t think so, I mean interest rates are rising, we’re up 37% on interest, on our client funds this quarter, we’re heading toward probably sixty some million dollars worth of interest up from the 45 range two years ago.
I think that’s all positive earning, our revenue growth top line helped by an acquisition, we did in the first quarter, at the end of the first quarter, we’re still up at the highest, we’ve been in probably six quarters from a top-line growth perspective so and a great dividend yield.
So we’re feeling strong about the results, we’ll have to see what happens in the market, Marty, what is the growth in this country of small to medium sized businesses now? Are they opening more than ever or are you surprised that they’re not well?
I think we’re back to a kind of a steady state of new business formation, I think that’s a very good thing, I think job growth in small businesses is right, they’re where it was back in our base year of 2004 for our index, we’re seeing job growth not increasing as much.
But it’s steady and it’s very sustainable and we’re seeing wage growth, as you know around 2.7 percent, it’s come down a little from almost three, but it’s still a 2.7 percent wage increase those two things are very positive for us, that’s for sure, how about wage inflation you’re concerned?
Should we be concerned as a country? I don’t think so. I think you’re seeing minimum wage increases and you’re seeing some of a scarcity of resource and I think that’s pushing the wages up close to three percent.
I think if we can stay in that 3 percent range. I think that’s a good thing. I mean that’s going to get consumers that feel better about saving and buying more and that’s going to spur more small business growth because of the growth and demand for services.
I think that’s a very positive thing, can you put in perspective Marty? The difference between paychecks and workdays is growing a 30 percent, they’re a cloud-based human capital management company or are these apples to oranges.
I think workday has got a much charger client base much larger clients in their base, they’re in that five thousand, ten thousand and more employees per business and I think we’re seeing the job growth is a little stronger in those businesses.
They’re also outsourcing a little bit faster now, so there are very different businesses, I do think what you’re seeing for us is that small business growth is continuing and with the level of regulations and compliance requirements, you’re going to see continued growth for us minimum wage increases Family Leave Act, health care changes, that’s driving small businesses to outsource.
I think that the investment is great, because you want to grow, but you’ve been a tremendous returner of capital, will that continue? We’ve got a great dividend yield, the highest in the industry by far and even though we set our margins, we’re going our operating margins, we’re going to decrease a little bit as we did these investments.
When you look at the bottom line, we’re still growing expecting next year to grow high single digits, if not double-digit earnings growth and we’re giving a great dividend yield, the best in the industry.
I think it’s going to continue and we’re excited about taking some of these dollars opportunistically investing them in additional product enhancements accelerating those driving more market demand in a digital environment.
I think this is going to be very good for our top-line revenue growth and in a few years to come, I couldn’t agree with you more. I think that the analyst were way too downbeat to me, the story was the pre-market story, it was the right one, the quick questions didn’t illuminate anything.
I want to thank Marty muses president CEO and paychecks pa YX will come sticking by my record recommendation, it’s a good story to leave stick with claim booyah Jim Cramer here, thanks for your time, see me on YouTube, click here to subscribe and get the jump on my exclusives with CEOs plus market news investing advice.