Paychex (PAYX) AI Stock Analysis

• Market Cap: $51.62B
• Dividend Yield: 2.73%
• Average Volume (3M): 2.45M
• Price to Earnings (P/E): 29.8
• Beta (1Y): 0.65
• Revenue Growth: 4.35%
• EPS Growth: 4.86%
• Country: US
• Employees: 16,500
• Sector: Industrials
• Sector Strength: 63
• Industry: Staffing & Employment Services
• EPS (TTM): 4.81
• Shares Outstanding: 360,190,670
• 10 Day Avg. Volume: 2,697,965
• 30 Day Avg. Volume: 2,451,851
• PEG Ratio: 6.13
• Price to Book (P/B): N/A
• Price to Sales (P/S): 9.59
• Price to Cash Flow (P/CF): 43.60
• P/FCF Ratio: 50.90
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $151.57
• Price Target Upside: 7.89% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 9

Paychex's overall score reflects strong financial performance, driven by healthy revenue growth and profitability. The acquisition of Paycor is a key positive, promising future growth. However, a high P/E ratio suggests potential overvaluation, and technical indicators show mixed signals about future price movements. The company's strategic investments in innovation and client retention provide a positive outlook despite macroeconomic challenges.

Positive Factors

Acquisition Synergies

Positive commentary about synergy and accretion expectations for its recently announced Paycor acquisition contributed to a positive reaction in shares.

Financial Performance

Shares have outperformed the S&P by 9% YTD.

Market Position

Paychex is perceived as a relative shelter amid elevated market volatility.

Negative Factors

Revenue Targets

Management cut FY PEO and Insurance Solutions revenue growth targets to 6.0%-6.5% from 7.0%-9.0%.

Small Business Confidence

Recent deterioration in small business confidence metrics amid a suddenly shakier macro backdrop could be a source of risk.

Valuation Concerns

Valuation looks extended in light of limited upside to estimates.

Paychex Business Overview & Revenue Model

Company Description

Paychex, Inc. provides integrated human capital management solutions for human resources (HR), payroll, benefits, and insurance services for small to medium-sized businesses in the United States, Europe, and India. It offers payroll processing services; payroll tax administration services; employee payment services; and regulatory compliance services, such as new-hire reporting and garnishment processing. The company also provides HR solutions, including payroll, employer compliance, HR and employee benefits administration, risk management outsourcing, and the on-site availability of a professionally trained HR representative; and retirement services administration, including plan implementation, ongoing compliance with government regulations, employee and employer reporting, participant and employer online access, electronic funds transfer, and other administrative services. In addition, it offers cloud-based HR administration software products for employee benefits management and administration, time and attendance, digital communication solutions, recruiting, and onboarding solutions; plan administration outsourcing and state unemployment insurance services; various business services to small to medium-sized businesses comprising payroll funding and outsourcing services, which include payroll processing, invoicing, and tax preparation; and payment processing services, financial fitness programs, and a small-business loan resource center. Further, the company provides insurance services for property and casualty coverage, such as workers' compensation, business-owner policies, cyber security protection, and commercial auto, as well as health and benefits coverage, including health, dental, vision, and life. It markets and sells its services primarily through its direct sales force. The company was founded in 1971 and is headquartered in Rochester, New York.

How the Company Makes Money

Paychex generates revenue primarily through its payroll processing and human resource services. The company charges fees for processing payroll, filing taxes, and managing employee paychecks for its clients. Additionally, Paychex earns money through its human resources outsourcing services, which include employee benefits administration, retirement services, and regulatory compliance assistance. The company also offers PEO services, providing comprehensive HR solutions for clients. Key revenue streams include subscription-based services, transaction-based fees, and value-added services. Paychex's strategic partnerships with financial institutions and technology providers enhance its service offerings and contribute to its growth in the competitive HR and payroll services market.

Paychex Financial Statement Overview

Summary

Paychex demonstrates strong financial health with consistent revenue growth, robust profitability, and a solid balance sheet. The company effectively manages its cash flows, supporting business operations and shareholder value. While the company maintains low leverage, continuing to enhance its equity base could further strengthen its financial resilience.

Income Statement

Paychex demonstrates strong income statement performance with consistent revenue growth and solid profitability. TTM revenue of $5.44 billion shows a growth rate of 3.06% from the previous year, indicating steady expansion. The gross profit margin of 72.03% and net profit margin of 31.99% highlight efficient operations and cost management. EBIT and EBITDA margins of 41.52% and 44.49%, respectively, further support the company's healthy profitability stance.

Balance Sheet

The balance sheet is solid, showcasing financial stability with a low debt-to-equity ratio of 0.02, reflecting minimal reliance on debt. A return on equity of 42.28% in TTM indicates effective use of equity capital. The equity ratio of 36.68% suggests a stable capital structure, though a slightly higher equity ratio could enhance long-term resilience.

Cash Flow

Cash flow analysis reveals strong cash generation capabilities with an operating cash flow to net income ratio of 1.02 and a free cash flow to net income ratio of 0.92. Despite a decrease in operating cash flow from the previous year, robust free cash flow of $1.60 billion supports strategic investments and shareholder returns.

Breakdown
TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Income Statement		Total Revenue
5.44B	5.28B	5.01B	4.61B	4.06B	4.04B
	Gross Profit
3.92B	3.80B	3.55B	3.26B	2.79B	2.76B
	EBIT
2.26B	2.17B	2.03B	1.84B	1.46B	1.46B
	EBITDA
2.48B	2.35B	2.21B	2.03B	1.65B	1.67B
	Net Income Common Stockholders
1.74B	1.69B	1.56B	1.39B	1.10B	1.10B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
395.03M	1.50B	1.60B	1.22B	1.03B	932.40M
	Total Assets
5.79B	10.38B	10.55B	9.64B	9.23B	8.55B
	Total Debt
0.00	885.50M	865.70M	881.20M	897.10M	898.80M
	Net Debt
-279.26M	-583.40M	-356.30M	511.20M	-98.10M	-6.40M
	Total Liabilities
4.39B	6.58B	7.05B	6.55B	6.28B	5.77B
	Stockholders Equity
1.40B	3.80B	3.49B	3.09B	2.95B	2.78B
Cash Flow		Free Cash Flow
1.60B	1.74B	1.56B	1.37B	1.15B	1.31B
	Operating Cash Flow
1.78B	1.90B	1.70B	1.51B	1.26B	1.44B
	Investing Cash Flow
-424.80M	-260.90M	218.50M	-1.42B	-460.60M	771.90M
	Financing Cash Flow
-3.49B	-1.87B	-711.40M	-979.30M	-636.40M	-1.49B

Paychex Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 140.49
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PAYX, the sentiment is Negative. The current price of 140.49 is below the 20-day moving average (MA) of 147.72, below the 50-day MA of 148.57, and above the 200-day MA of 136.93, indicating a neutral trend. The MACD of 1.03 indicates Negative momentum. The RSI at 61.66 is Neutral, neither overbought nor oversold. The STOCH value of 91.16 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PAYX.

Paychex Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ADP	78 Outperform	$116.42B	29.85	83.72%	2.06%	7.09%	11.51%
NSP	77 Outperform	$3.15B	35.35	95.48%	2.83%	1.47%	-45.91%
KFY	74 Outperform	$3.22B	13.39	13.92%	2.55%	-3.27%	62.57%
PAYX	73 Outperform	$51.62B	29.81	44.25%	2.73%	4.35%	4.86%
Sector *	62 Neutral	$7.24B	12.39	3.08%	3.39%	3.63%	-14.35%
TNET	61 Neutral	$3.65B	21.31	235.37%	1.36%	1.67%	-47.56%
RHI	60 Neutral	$4.95B	19.82	16.96%	4.50%	-9.33%	-37.06%

Paychex Corporate Events

Paychex Acquires Paycor HCM for $4.1 Billion

Paychex has announced a definitive agreement to acquire Paycor HCM in an all-cash transaction valued at approximately $4.1 billion, enhancing its capabilities in the human capital management sector. The acquisition is set to expand Paychex’s offering of AI-driven HR solutions and deepen its penetration in the upmarket segment, promising significant cost synergies and revenue opportunities, while being expected to be accretive to earnings in the near future.