Investopedia: Will Stimulus Push Cintas Higher?

The United States employment situation really hasn't gotten much better over the last year, but that hasn't hurt the shares of uniform supplier Cintas (Nasdaq:CTAS) all that much. Up more than 45% over the past year, it's worth asking whether investors have already baked in an improving job market - even if those improvements have yet to show up in the government's statistical data. Cintas remains a high-quality, well-run business with some meaningful barriers to competition, but the valuation case is a little more unclear.

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Investopedia: UniFirst Shan't Be Last

With the reports of job growth still fairly unimpressive, it would seem logical to think that the providers of uniforms to employers would be in trouble. That's the problem with making assumptions about what constitutes "logic" sometimes - in actual fact, uniform service providers like UniFirst (NYSE:UNF) are still seeing respectable growth in revenue and these shares have been fairly strong on a relative basis.

More Growth to Start the Fiscal Year  
UniFirst reported that revenue rose almost 15% for the fiscal first quarter, stimulated by 17% growth in the small Specialty Garments business and a solid 12% organic growth in the core laundry business. The first aid business was also strong (revenue up more than 22%), but it represents a trivial part of the company's total revenue. (For related reading, see A Look At Corporate Profit Margins.)

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Investopedia: Resources Connection - Abundant Opportunity And Uncertainty

The business of providing temporary workers on a contract or project basis is always going to be a volatile one, so investors in Resources Connection (Nasdaq:RECN) just have to make their peace with that. What's a little more challenging, though, is figuring out how that volatility will break. Does a stagnant economy in North America encourage companies to hire temporary workers in lieu of full-timers? Will a recession in Europe destroy more business than it creates for this company? Can this company regain attractive past levels of cash flow production and returns on capital?

A Decent Fiscal Second Quarter
Resources Connection reported that revenue rose a little less than 5% from last year and a little more than 5% from the prior quarter. The U.S. remained weak, as revenue was up just a bit more than 1%, while Europe and Asia were strong with over 17% and 9% constant currency growth, respectively.


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Paychex Sees A Slow Road Back

There are plenty of ways in which the U.S. economy is stronger now than it was a year ago, but that does not mean that current conditions make for a rollicking good time. In particular, companies are not yet hiring in a big way, and that is keeping a lid on the recovery of payroll and HR outsourcer Paychex (Nasdaq:PAYX). 

The Quarter That Was
Paychex's fiscal first quarter seems to fit the overall sense of the economy - slight improvement here and there, but nothing close to enough strength to lift the overall sense of gloom (or at least deep concern). Revenue was up 4% (and ahead of expectations), as payroll service revenue rose almost 2% and human resources services-related revenue rose more than 10%. 


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Get Paid To Wait By Paychex

Imagine a business that makes money when companies are hiring and interest rates are at a nice, healthy level. Now imagine how well a business like that might be doing right now. Therein lies the problem with Paychex (Nasdaq:PAYX). Although this provider of HR and payroll services to small-to-mid-size businesses is a fine company with ample growth prospects, the company's stock has been knocked down by a one-two punch outside of its control. 

Low Rates Are Not Good For Everybody
Like its larger competitor Automatic Data Processing (NYSE:ADP), Paychex has traditionally garnered a nice chunk of very high-margin revenue by earning interest on the payroll amounts that it processes for employers. In a nutshell, Paychex requires that client companies transfer funds to them before they must send them on to the employees, creating a "float" that the company can invest in interest-bearing instruments like commercial paper or bonds. While not exactly the same, this float is analogous to the float that Berkshire Hathaway's (NYSE:BRK.A) Warren Buffett often references as a major source of that company's competitive advantage. (For more on this topic, check out Competitive Advantage Counts.)

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