Stifel Nicolaus analyst David Grossman has maintained their neutral stance on PAYX stock, giving a Hold rating on June 17.
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David Grossman has given his Hold rating due to a combination of factors related to Paychex’s recent acquisition and current market valuation. The acquisition of PYCR is seen as a strategic positive, offering Paychex a stronger foothold in the mid-market segment, which was previously less accessible. This acquisition is expected to be modestly accretive to earnings in the coming fiscal years, but the initial debt burden of $225 million pre-tax is a consideration that tempers enthusiasm.
Despite the strategic benefits, Paychex’s stock is trading at a significant premium compared to the S&P 500, aligning with its competitor ADP but above its historical average. This valuation suggests that the stock is fully valued at present, reflecting its defensive characteristics. Additionally, while the acquisition is expected to provide cost synergies and potentially enhance revenue growth, the full extent of these synergies remains unquantified, adding an element of uncertainty to future performance projections.
Based on the recent corporate insider activity of 76 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of PAYX in relation to earlier this year.