Paychex (PAYX) AI Stock Analysis

• Market Cap: $39.59B
• Dividend Yield: 3.7%
• Average Volume (3M): 3.09M
• Price to Earnings (P/E): 25.0
• Beta (1Y): 0.49
• Revenue Growth: 12.37%
• EPS Growth: -7.18%
• Country: US
• Employees: 16,500
• Sector: Technology
• Sector Strength: 88
• Industry: Staffing & Employment Services
• EPS (TTM): 1.26
• Shares Outstanding: 358,967,440
• 10 Day Avg. Volume: 2,490,274
• 30 Day Avg. Volume: 3,092,259
• PEG Ratio: -17.88
• Price to Book (P/B): 13.78
• Price to Sales (P/S): 10.21
• P/FCF Ratio: 32.33
• Enterprise Value/Market Cap: 0.97
• Enterprise Value/Revenue: 6.36
• Enterprise Value/Gross Profit: 8.67
• Enterprise Value/Ebitda: 14.40
• 1Y Price Target: $120.55
• Price Target Upside: 9.30% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 12
• EPS Forecast (FY): 5.49
• Revenue Forecast (FY): $6.50B

• Rating: 77 Outperform
• Price Target: $130.00 ▲(17.87% Upside)

Paychex's overall stock score is driven by its strong financial performance and positive earnings call, which highlight robust revenue growth and strategic advancements in AI. The technical analysis indicates a bearish trend, but the company's valuation remains attractive with a solid dividend yield.

Positive Factors

Revenue Growth

Strong revenue growth indicates robust demand for Paychex's services, suggesting a solid market position and potential for continued expansion.

AI Integration

AI integration enhances operational efficiency and client outcomes, positioning Paychex for improved margins and competitive advantage.

Cash Flow Management

Strong cash flow management ensures financial flexibility, enabling strategic investments and resilience against economic fluctuations.

Negative Factors

Softer Revenue Per Client

Softer revenue per client growth could indicate challenges in upselling or cross-selling, potentially impacting future revenue growth.

Insurance Agency Performance

Challenges in the insurance segment could weigh on overall profitability, requiring strategic adjustments to mitigate impacts.

Paycor Growth Concerns

Below-expectation growth in Paycor may signal integration challenges, potentially affecting synergy realization and strategic goals.

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 diverse portfolio of services, which can be categorized into two main segments: Payroll Services and Human Resource Services. The Payroll Services segment accounts for a significant portion of the company's revenue, providing clients with payroll processing, tax filing, and employee payment services. The Human Resource Services segment includes offerings such as employee benefits administration, HR consulting, and compliance assistance. Revenue is typically derived from service fees that clients pay based on the number of employees or the volume of payroll processed. Additionally, Paychex has formed strategic partnerships with various financial institutions and technology providers, enhancing its service offerings and expanding its market reach. The company also benefits from recurring revenue streams through subscription models for ongoing HR services and software solutions, thus ensuring stable and predictable cash flow.

Paychex Financial Statement Overview

Summary

Paychex exhibits strong financial health with consistent revenue growth, robust profitability, and effective cash flow management. The significant reduction in debt enhances its financial stability, making it well-positioned in the staffing and employment services industry.

Income Statement

Paychex has demonstrated consistent revenue growth with a TTM growth rate of 4.16%. The company maintains strong profitability metrics, with a gross profit margin of 73.36% and a net profit margin of 26.45% in the TTM. Although there is a slight decline in EBIT and EBITDA margins compared to previous years, the overall profitability remains robust.

Balance Sheet

The balance sheet shows a significant reduction in total debt, leading to a very low debt-to-equity ratio of 0.02 in the TTM, indicating strong financial stability. The return on equity is impressive at 39.66%, reflecting efficient use of equity to generate profits. However, the equity ratio is not calculated due to missing data on total assets.

Cash Flow

Paychex has shown a healthy free cash flow growth rate of 7.01% in the TTM, indicating strong cash generation capabilities. The operating cash flow to net income ratio is 0.32, and the free cash flow to net income ratio is 0.90, both suggesting efficient cash flow management. The company has consistently improved its cash flow metrics over the years.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	5.57B	5.28B	5.01B	4.61B	4.06B
Gross Profit	4.03B	3.80B	3.55B	3.26B	2.79B
EBITDA	2.49B	2.43B	2.21B	2.03B	1.65B
Net Income	1.66B	1.69B	1.56B	1.39B	1.10B
Balance Sheet
Total Assets	16.56B	10.38B	10.55B	9.64B	9.23B
Cash, Cash Equivalents and Short-Term Investments	1.66B	1.50B	1.60B	1.22B	1.03B
Total Debt	5.02B	866.30M	865.70M	881.20M	897.10M
Total Liabilities	12.44B	6.58B	7.05B	6.55B	6.28B
Stockholders Equity	4.13B	3.80B	3.49B	3.09B	2.95B
Cash Flow
Free Cash Flow	1.76B	1.74B	1.56B	1.37B	1.15B
Operating Cash Flow	1.95B	1.90B	1.70B	1.51B	1.26B
Investing Cash Flow	-3.68B	-260.90M	218.50M	-1.42B	-460.60M
Financing Cash Flow	2.56B	-1.87B	-711.40M	-979.30M	-636.40M

Paychex Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 110.29
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

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 110.29 is below the 20-day moving average (MA) of 112.63, below the 50-day MA of 112.32, and below the 200-day MA of 132.48, indicating a bearish trend. The MACD of -0.76 indicates Positive momentum. The RSI at 43.58 is Neutral, neither overbought nor oversold. The STOCH value of 32.37 is Neutral, 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
PAYX	77 Outperform	$39.59B	24.99	40.88%	3.70%	12.37%	-7.18%
ADP	70 Outperform	$104.55B	25.49	70.57%	2.46%	7.07%	8.32%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
TNET	58 Neutral	$2.98B	22.69	111.30%	1.81%	0.99%	-47.02%
NSP	54 Neutral	$1.72B	102.98	16.04%	6.37%	3.19%	-86.21%
MAN	54 Neutral	$1.41B	-66.02	-1.00%	4.96%	-2.44%	-156.01%
ZIP	46 Neutral	$252.40M	-6.37	―	―	-10.14%	-1381.34%