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Paychex Inc PAYX

Morningstar Rating
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Stock XNAS Rating as of
$117.00 −1.56 (1.32%)
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As of Delayed Price Pre-Open: $117.00 0.00
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Company Report

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Paychex Earnings: Robust Revenue Retention and Improved Profitability Despite ERTC Headwinds

Emma Williams

We maintain our $120 fair value estimate for wide-moat Paychex following the release of reasonable fourth-quarter and full-year fiscal 2024 results that came in marginally short of our above-consensus expectations. Paychex continues to benefit from robust revenue retention indicative of high customer switching costs and improving profitability despite the winding down of high-margin employee retention tax credit, or ERTC, services. We have made minor adjustments to our near-term forecasts to account for updated fiscal-year 2025 guidance, however, this is immaterial to our valuation. Paychex shares fell about 6% after the release toward our unchanged fair value estimate and continue to screen as fairly valued.

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Price vs Fair Value

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PAYX is trading at a 375% premium.
Price
$117.00
Fair Value
$922.00
Uncertainty
High
1-Star Price
$357.00
5-Star Price
$91.00
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Paychex is well placed to benefit from increased regulatory complexity under a U.S. Democratic administration.

Bears

Paychex faces increasing competitive pressure from nimble upstarts, legacy peers, and accounting software providers encroaching on the full-service market. This dynamic will likely lead to greater pricing pressure for Paychex and continued elevated investment in software development.

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News

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Trading Information

Previous Close Price
$118.56
Day Range
$116.36–120.14
52-Week Range
$106.27–129.70
Bid/Ask
$116.80 / $123.00
Market Cap
$42.12 Bil
Volume/Avg
31 / 2.0 Mil

Key Statistics

Price/Earnings (Normalized)
25.62
Price/Sales
8.03
Dividend Yield (Trailing)
3.12%
Dividend Yield (Forward)
3.35%
Total Yield
3.52%

Company Profile

Paychex is a leading provider of payroll, human capital management, and insurance solutions servicing small and midsize clients primarily in the United States. The company, established in 1979, services over 745,000 clients and pays over 1 in 12 U.S. private-sector workers. Alongside its traditional payroll services, Paychex offers HCM solutions such as benefits administration and time and attendance software, as well as human resources outsourcing and insurance agency services.
Sector
Industrials
Industry
Staffing & Employment Services
Stock Style Box
Mid Core
Total Number of Employees
16,600
Website
https://www.paychex.com

Competitors

Valuation

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Metric
PAYX
ADP
PCTY
Price/Earnings (Normalized)
 25.6226.3320.56
Price/Book Value
 11.0820.876.77
Price/Sales
 8.035.165.55
Price/Cash Flow
 19.4517.8117.10
Price/Earnings
PAYX
ADP
PCTY

Financial Strength

Metric
PAYX
ADP
PCTY
Quick Ratio
 0.430.120.14
Current Ratio
 1.241.011.13
Interest Coverage
 57.7213.46—
Quick Ratio
PAYX
ADP
PCTY

Profitability

Metric
PAYX
ADP
PCTY
Return on Assets (Normalized)
 14.17%6.59%8.69%
Return on Equity (Normalized)
 46.62%94.48%39.73%
Return on Invested Capital (Normalized)
 36.73%52.00%37.09%
Return on Assets
PAYX
ADP
PCTY
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