Paychex, Inc. (PAYX): The Most Profitable Payroll Service Company

Automatic Data Processing (NASDAQ:ADP) is the biggest company of the three, with a total market cap of $31.5 billion. At around $65 per share, the company has the most expensive valuation at 15.8 times EV/EBITDA. Insperity is the smallest company with the lowest valuation. At around $28 per share, Insperity Inc (NYSE:NSP) has a total market cap of $719 million. The market values Insperity at only 5.14 times EV/EBITDA.

Among the three, Paychex is the most profitable company with the highest operating margin and highest return on invested capital. Paychex generated the highest operating margin of 38.5%, while the operating margin of Automatic Data Processing is less than half of Paychex’s, at only 15.1%. Insperity generated the lowest operating margin at only 3.3%. As mentioned above, its ROIC is also the highest at 36.7%, while the ROIC of Automatic Data Processing and Insperity are only 22.2% and 16.1%, respectively.

Income investors would also like Paychex, Inc. (NASDAQ:PAYX) the best as it pays the juiciest dividend yield at 3.8%. Automatic Data Processing ranked second with a 2.7% dividend yield, while the dividend yield of Insperity is the lowest at 2.4%.

The Foolish bottom line

Paychex, Inc. (NASDAQ:PAYX) is really the most profitable payroll and benefits outsourcing solutions business among its peers. With a growing business, high dividend yield, and a reasonable valuation, investors might consider Paychex for their long-term portfolios.

The article The Most Profitable Payroll Service Company originally appeared on Fool.com and is written by Anh Hoang.

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