The labor market remains strong. Unemployment is under 4%, and has only ticked up slightly in the past year, even as interest rates have soared. Companies continue to hire. Even big tech companies laying off employees in one division may be hiring somewhere else.
For now, trends support a strong job market. And that could mean that companies that cater to employment and staffing services could be winners overall.
One such company is Paychex (PAYX), a provider of HR services such as payroll. The company’s most recent revenues missed Wall Street estimates, but the company looks well positioned for a strong labor market.
Paychex has lagged the market, rising just 10% in the past year. But the company sports a hefty 32% profit margin, and the company’s services will likely be in increasing demand in the years ahead.
Action to take: Paychex could be a surprising winner given the current strength of the job market. And while Wall Street may not like any specific quarter’s results, a higher trend over time should lead to a higher share price.
At current prices, Paychex also pays a 2.9% dividend.
For traders, the trend higher for shares is likely to continue. The September $130 calls, last trading for about $2.65, could see mid-double-digit returns from this unexpectedly strong part of the market.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.