Paychex’s Return on Invested Capital (ROIC) of 42.42% significantly surpasses its Weighted Average Cost of Capital (WACC) of 8.97%, showcasing superior capital efficiency.
With a ROIC to WACC ratio of 4.73, Paychex outperforms competitors like ADP, CTAS, FAST, FISV, and PCAR in generating returns well above its cost of capital.
Paychex’s effective capital utilization indicates robust value creation for shareholders, setting a benchmark in the payroll and HR services 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 operates in a competitive landscape alongside firms like Automatic Data Processing, Inc. (ADP) and Cintas Corporation (CTAS). Paychex’s ability to efficiently utilize its capital is a key factor in its competitive edge.
Paychex boasts a Return on Invested Capital (ROIC) of 42.42%, significantly higher than its Weighted Average Cost of Capital (WACC) of 8.97%. This results in a ROIC to WACC ratio of 4.73, indicating that Paychex is generating returns well above its cost of capital. This efficient capital utilization suggests that Paychex is effectively creating value for its shareholders.
In comparison, Automatic Data Processing, Inc. (ADP) has a ROIC of 28.59% and a WACC of 8.14%, resulting in a ROIC to WACC ratio of 3.51. While ADP also demonstrates strong capital efficiency, it falls short of Paychex’s performance. This highlights Paychex’s superior ability to leverage its capital for higher returns.
Fastenal Company (FAST) and Cintas Corporation (CTAS) also show commendable ROIC to WACC ratios of 3.36 and 3.37, respectively. However, these figures are still below Paychex’s ratio, reinforcing Paychex’s position as a leader in capital efficiency among its peers.
Fiserv, Inc. (FISV) and PACCAR Inc (PCAR) have lower ROIC to WACC ratios of 2.07 and 1.65, respectively. These figures suggest that these companies are less effective in generating returns relative to their cost of capital compared to Paychex. This further underscores Paychex’s strong performance in capital utilization.
