Paychex: Strengths, Weaknesses, Opportunities, Threats

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.