Payday can’t come too soon for this Rochester (N.Y.) payroll processing company. Paychex provides payment and other human resources functions for 550,000 small and midsize businesses. It’s a predictable niche that generates huge cash flow—about $500 million in 2006. Customers are disinclined to switch payroll service providers, and Paychex’ emphasis on a well-trained workforce keeps clients content. Despite incursions from larger rival Automatic Data Processing, Paychex is expanding market share, aiming to increase its client base 5% each year. In 2004, Jonathan Judge took over as chief executive for founder Tom Golisano, who remains chairman. The transition has been smooth: Last year sales increased 16% and earnings jumped 26%. Shareholders were kept happy, too, with a robust 2.1% dividend.

Overall Grade


Market Data


Market Value

$15.5 Billion




Sales Growth Rate**



12-Month Sales

$1.8 Billion

12-Month Net Income

$0.5 Billion

Total Return Past 12 Months


Past 36 Months


Economic SectorInformation Technology
IndustryData Processing & Outsourced Services
The overall sector letter grade reflects how the weighted average of the return on income, or return on equity, and sales growth grades compare with others in the same sector. For the overall grade as well as the ROE/ROI and sales growth grades, an "A" places a company in the top 7% of its sector and an "A-" in the top 14% of the sector. The actual ranking was done using the underlying numerical measures. Grades are for information only.
* For nonfinancial companies, three-year average pretax operating profit before interest and special items as a percentage of average invested capital. For financial companies, pretax profits as a percentage of average shareholder's equity.
*Three-year average annual sales growth based on the most recently reported 36 months, calculated using the least-squares method.

Jonathan J. Judge

Jonathan J. Judge, 53

CEO since 2004

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Data as of 2/28/07 provided by Standard & Poor's Compustat