One of the best ways to develop a picture of any company is with the SWOT analysis -- a look at a company's strengths, weaknesses, opportunities, and threats. Today I'd like to focus on Paychex (Nasdaq: PAYX), the payroll and human resources provider that I called The Best Growth Stock You're Totally Overlooking last fall.

Strengths

Scale:

  • Cost advantages
  • Breadth of services
  • Market insights

Brand:

  • Name recognition in a fragmented market
  • Affords pricing power

Sticky nature of core services:

  • Recurring transactions
  • High switching costs

Weaknesses

  • Difficult to reinvest capital at high ROICs
  • New services consume managerial mindshare

Opportunities

Cross-selling of new services

Organic market-share gains:

  • Unique value proposition
  • Market is largely untapped

Roll-up acquisitions

Threats

Irrational industry pricing

High unemployment:

  • Fewer checks cut
  • Reduced float
  • Lower interest rates

Regulatory environment

What parts of Paychex's SWOT need more detail? Fill in the blanks by using the comments section below.

Joe Magyer is a senior analyst at The Motley Fool. Joe owns shares of Paychex, which is an Inside Value and Income Investor recommendation. Read about the Fool's disclosure policy here.