Paychex, Inc. (NASDAQ:PAYX) boasts a Return on Invested Capital (ROIC) of 32.27%, significantly higher than its Weighted Average Cost of Capital (WACC) of 9.01%.
Compared to its peers, Paychex has a higher ROIC to WACC ratio of 3.58, indicating superior capital efficiency.
PACCAR Inc (PCAR) has the highest ROIC to WACC ratio among the companies analyzed at 4.49, but Paychex’s performance is still notably strong in its industry.
Paychex, Inc. (NASDAQ:PAYX) is a leading provider of payroll, human resource, and benefits outsourcing services for small to medium-sized businesses. The company competes with firms like Automatic Data Processing, Inc. (ADP) and Cintas Corporation (CTAS) in the business services sector. Paychex’s financial performance is often compared to its peers to assess its capital efficiency.
Paychex boasts a Return on Invested Capital (ROIC) of 32.27%, significantly higher than its Weighted Average Cost of Capital (WACC) of 9.01%. This results in a ROIC to WACC ratio of 3.58, indicating that Paychex is effectively generating returns well above its cost of capital. This efficiency is a key indicator of the company’s strong financial health and operational effectiveness.
In comparison, Automatic Data Processing, Inc. (ADP) has a ROIC of 4.98% and a WACC of 8.19%, resulting in a ROIC to WACC ratio of 0.61. This suggests that ADP is not utilizing its capital as effectively as Paychex. Similarly, Cintas Corporation (CTAS) has a ROIC to WACC ratio of 2.09, which is lower than Paychex’s, further highlighting Paychex’s superior capital efficiency.
Fastenal Company (FAST) and Fiserv, Inc. (FISV) also trail behind Paychex in terms of capital efficiency. Fastenal’s ROIC to WACC ratio is 3.03, while Fiserv’s is 1.94. Although Fastenal’s ratio is relatively close to Paychex’s, Paychex still maintains a competitive edge in generating returns above its cost of capital.
PACCAR Inc (PCAR) stands out with the highest ROIC to WACC ratio of 4.49 among the companies analyzed. Despite this, Paychex’s ratio of 3.58 is still impressive, showcasing its ability to effectively utilize capital to generate substantial returns. This positions Paychex as a strong performer in its industry, second only to PACCAR in terms of capital efficiency.
