Stock Option Investment Advice

Paychex (PAYX) Cashes in During 3rd Quarter

New York based Paychex (PAYX) met Wall Street estimates by netting 39 cents per share during its fiscal 3rd quarter. Profits were up 13% for the quarter, which matched analyst expectations. The company, known as a payroll processor, is fast turning into a full service human resource specialist.

Revenue for its third quarter was $532.2 million, just off the $533.3 million anticipated. While revenue rose 10% from last year’s second quarter, investors were especially excited about the company’s modest 3% cost rise. This helped lead to a 39.5% increase in operating margin. This is a great business signal.

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Stock trading picked up quite a bit as investors moved quickly to add the stock to their trading portfolio. Investors were as much hopeful about the stable growth and business development the company has demonstrated. As evidence, the company maintained its conservative outlook for the near-term, which often is a stock negative. Investors, however, chose to focus on the current condition of the company, and its great fiscal management and strong operating margin. This makes great sense, but is often not how stock investing plays out.

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Paychex offers a great stock trading opportunity for many long-term stock trading strategies. Along with strong business fundamentals, the company has room to grow in stock price as its one year target price is $39.09. The company’s stock price currently sits about $35 after its recent surge. As importantly to long-term traders, the company current offers a $1.20 annual dividend yield. This provides great ongoing income opportunity and the potential for high returns on investment from the company’s stock. It also encourages interest in covered call investing strategies or covered call trades.

Paychex has remained in a fairly narrow trading range during its last 52-week trading period. The low stock price during that time was above $30, while the high was below $48. This has somewhat limited implied volatility. This could be perceived as a positive for traders who want a stable investment that produces dividend yields and maintains price. Investors looking for more rapid growth may be concerned about the ability of the stock to project high prices in the future.

Some forecasts suggest uncertainty in the near future for the payroll processing industry. However, many analysts, and traders are high on Paychex because of its diversified portfolio of human resource services. The company seems to have strong leadership as it has been proactive at finding service gaps to fill in order to stay above the competition within its industry. More importantly, its broad range of services makes it better equipped to manage slowdowns from any one particular service.

Ultimately, investors need to examine their own stock trading strategies to determine if Paychex is a good fit. There are definitely some glaring advantages to incorporating the stock into a diversified portfolio.

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[tags] New York, Wall Street, PAYX, Paychex Inc., covered call investing, covered call strategies, high returns on investment, implied volatility, investing in stock options, poweroptions, stock investing, stock market help, stock market investment strategies, stock options, stock trading [/tags]

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