How Do Paychex And ADP Compare On Core Payroll Processing Business?
Paychex and ADP offer payroll processing services to businesses of varying sizes around the globe. Payroll processing includes the paper and electronic distribution of employee compensation, along with the processing of tax withholdings and other employee contributions. ADP’s core customer base includes large enterprise customers, while Paychex primarily caters to small and medium-sized businesses. Correspondingly, ADP generated a significantly higher revenue per client compared to Paychex. Over the last five years, ADP has expanded its customer base at a faster pace than Paychex, as evident in the table below. As a result, the revenue generated by ADP through payroll processing operations grew at a CAGR of about 6%, compared to 3% for Paychex.
Over the last few quarters, Paychex has witnessed meaningful growth in its payroll revenues due to growth in small businesses. Paychex’s management believes that future small business growth could provide a a strong opportunity for the company to expand operations in this space. [1] We forecast Paychex’s revenue generated per client to grow at a faster pace than the historical rate (at a CAGR of around 4% from 2016 through 2021) as economic conditions improve. Consequently, growth in payroll revenues could be as high as 5% in the next five years.
Have more questions about Paychex (NASDAQ:PAYX) and ADP (NASDAQ:ADP)? See the links below:
- What’s Paychex’s Fundamental Value Based On Expected 2016 Results?
- What’s ADP’s Fundamental Value Based On Expected 2016 Results?
- What’s Paychex’s Revenue & Earnings Composition?
- What’s ADP’s Revenue & EBITDA Breakdown By Segment?
- How Has Paychex’s Revenue & EBITDA Composition Changed In The Last Five Years?
- How Has ADP’s Revenue & EBITDA Composition Changed In The Last Five Years?
- Where Will Paychex’s Revenue Growth Come From In The Next Five Years?
- Where Will ADP’s Revenue Growth Come From In The Next Five Years?
Notes:
- Can Paychex Stock Recover To Its Pre-Inflation Shock Highs?
- Can Paychex Stock Recover To Its Pre-Inflation Shock Highs?
- With The Job Market Holding Up, What To Expect From Paychex Q2 Results?
- What To Expect From Paychex Q1 Results
- What’s Happening With Paychex Stock?
- Forecast Of The Day: Paychex Management Solutions Revenue
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- Small business is back: Paychex CEO, Yahoo! Finance, September 2015 [↩]