Paychex, Inc. (PAYX), Automatic Data Processing (ADP), Intuit Inc. (INTU): Growth And Expectations

Then there’s Intuit Inc. (NASDAQ:INTU), which expects FY2014 revenue and EPS growth of 6%-8% and 10%-13%, respectively. For a more specific breakdown, the company’s recent realignment is expected to lead to 3%-5% revenue growth in its Consumer Group segment, 10%-12% revenue growth in its Small Business Group segment, and 0%-4% revenue growth in its Professional Tax segment.

If you look at the all-time historical stock performance for these three companies, Intuit Inc. (NASDAQ:INTU) is the best long-term performer of the group.

INTU data by YCharts

However, it should be noted that Automatic Data Processing (NASDAQ:ADP) was the most resilient of the three at the height of the Great Recession, mostly due to its larger size, with the stock dropping approximately 20%, versus 30% for Intuit Inc. (NASDAQ:INTU), and 40% for Paychex. All three stocks held up relatively well compared to the carnage seen throughout the broader market at the time.

Currently, all three stocks have similar valuations, with Paychex, Inc. (NASDAQ:PAYX) trading at 25 times earnings, and Automatic Data Processing (NASDAQ:ADP) and Intuit Inc. (NASDAQ:INTU) trading at 25 and 22 times earnings, respectively. Paycheck does yield 3.60%, compared to 2.40% and 1.10% for Automatic Data Processing (NASDAQ:ADP) and Intuit Inc. (NASDAQ:INTU).

Conclusion

All three companies mentioned in this article are likely to be long-term winners. In all three cases, you have quality management and strong guidance. As far as Paychex goes, the biggest concern doesn’t relate to any company-specific matters, but the broader economic environment. Though the stock is somewhat resilient on a relative basis, nobody aims for losses. With the global economy on questionable ground and the stock market potentially overextended, this might not be the ideal entry point for Paychex. However, an investment in a strong underlying company will almost always work out in the end. If you plan on investing, consider doing so at an incremental pace so you can add to your position if the stock suffers downside moves.

The article A Service Company with Steady Growth originally appeared on Fool.com and is written by Dan Moskowitz.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Automatic Data Processing, Intuit, and Paychex. The Motley Fool owns shares of Intuit and Paychex.

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