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Paychex (PAYX) AI Stock Analysis

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Paychex

(NASDAQ:PAYX)

Select Model

Outperform 75 (OpenAI - 5.2)

Rating:75Outperform

Price Target:

$108.00

▲(17.44% Upside)

Action:Reiterated

Date:06/25/26

PAYX scores well primarily on financial performance—strong margins and consistently high free-cash-flow conversion—supported by a shareholder-friendly dividend and reasonable P/E. Offsetting factors are mixed technical trends (below key short/long-term averages) and a more conservative FY27 outlook that signals slower growth amid interest-income and macro headwinds.

Positive Factors

Recurring HCM service model

Paychex’s core payroll and HCM services generate recurring, per-employee fees with high margins and steady revenue growth. This subscription-like cash flow supports predictable earnings, strong retention and effective cross-sell, sustaining durable revenue and margin profile over cycles.

Negative Factors

Guidance growth slowdown

Management’s FY27 guide implies a material deceleration vs. FY26’s double-digit growth, reducing near-term operating leverage. Slower top-line expansion can limit margin expansion and constrain reinvestment or faster debt reduction, affecting multi-quarter earnings momentum and strategic optionality.

Read all positive and negative factors

Positive Factors

Negative Factors

Recurring HCM service model

Read all positive factors

Paychex Key Performance Indicators (KPIs)

Any

Revenue by Segment

Revenue by Segment
Breaks down revenue across different business lines, highlighting which segments are driving growth and profitability, and where there may be opportunities or challenges.

Chart InsightsManagement Solutions has jumped materially since the Paycor deal—recent quarters show double‑digit expansion largely driven by the acquisition (management cited ~19 percentage points of growth), while organic growth is mid‑single digits (~4–5%), so sustained upside hinges on converting larger Paycor bookings and improving module attach. PEO & Insurance is delivering steady high‑single‑digit WSE and retention gains, adding durable recurring revenue. Management expects margin tailwinds from AI and Paycor synergies, but near‑term risks include integration costs, higher leverage and timing lags in revenue conversion that could mute cash flow despite strong headline growth.

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Paychex (PAYX) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$37.82B

Dividend Yield3.7%

Average Volume (3M)3.29M

Price to Earnings (P/E)21.5

Beta (1Y)0.42

Revenue Growth16.88%

EPS Growth6.56%

CountryUS

Employees16,500

SectorTechnology

Sector Strength88

IndustryStaffing & Employment Services

Share Statistics

EPS (TTM)4.91

Shares Outstanding355,600,000

10 Day Avg. Volume3,547,859

30 Day Avg. Volume3,286,916

Financial Highlights & Ratios

PEG Ratio3.21

Price to Book (P/B)9.84

Price to Sales (P/S)5.65

P/FCF Ratio15.84

Enterprise Value/Market Cap1.01

Enterprise Value/Revenue5.86

Enterprise Value/Gross Profit7.89

Enterprise Value/Ebitda12.69

Forecast

1Y Price Target

$105.00

Price Target Upside14.18% Upside

Rating ConsensusHold

Number of Analyst Covering12

EPS Forecast (FY)5.97

Revenue Forecast (FY)$6.86B

Paychex Business Overview & Revenue Model

Company Description

Founded in 1971 and headquartered in Rochester, New York, Paychex, Inc. delivers comprehensive human capital management (HCM) solutions. The company primarily serves small to medium-sized enterprises (SMEs) across the United States, Europe, and In...

How the Company Makes Money

Paychex generates revenue primarily through recurring fees for delivering payroll and HCM-related services and through interest income earned on client funds it holds temporarily. Its key revenue streams generally include: (1) Service revenue: fee...

Paychex Earnings Call Summary

Earnings Call Date:Jun 24, 2026

(Q4-2026)

% Change Since: |

Next Earnings Date:Sep 30, 2026

Earnings Call Sentiment Positive

The call conveyed strong operational execution and financial performance in fiscal 2026 — double-digit revenue and earnings growth, margin expansion, exceptional cash generation, successful Paycor integration with >$100M in cost synergies, and early commercial traction for the WISE AI platform and advisory offerings. Management tempered optimism with conservative fiscal 2027 guidance (5%–6% revenue growth) reflecting lower interest income, the lapping of one-time gains, and an intentional, selective approach to client acquisition. While there are near-term headwinds (interest float decline, insurance agency drag, flat client counts) and ongoing integration/legal complexity, the balance of evidence — robust cash flow, shareholder returns, improving organic momentum, and AI-enabled product differentiation — points to continued durable performance and strategic optionality.

Positive Updates

Strong Top-Line Growth

Total revenue increased 12% in Q4 to $1.6 billion and 17% for fiscal 2026 to $6.5 billion, driven by the Paycor acquisition anniversary and accelerating organic growth each quarter.

Negative Updates

Slower Guided Growth for Fiscal 2027

Guidance for fiscal 2027 calls for total revenue growth of 5%–6% (management solutions 5%–6%, PEO/Insurance 6%–7%) and adjusted diluted EPS growth of 7%–9%, a meaningful deceleration from fiscal 2026's 17% revenue growth.

Read all updates

Q4-2026 Updates

Positive

Negative

Strong Top-Line Growth

Total revenue increased 12% in Q4 to $1.6 billion and 17% for fiscal 2026 to $6.5 billion, driven by the Paycor acquisition anniversary and accelerating organic growth each quarter.

Read all positive updates

Company Guidance

Paychex guided fiscal 2027 total revenue growth of 5–6%, with Management Solutions revenue also +5–6% and PEO & Insurance Solutions revenue +6–7%; interest on funds held for clients is expected to be $195–205 million (a year‑over‑year decline reflecting the full‑year impact of 75 bps of cuts and lapping one‑time gains). The company expects adjusted operating income margin of approximately 44% (with first‑quarter adjusted operating margin of 41–42%), an effective tax rate of about 24%, and adjusted diluted EPS growth of 7–9%; Q1 revenue growth is expected to be consistent with the full‑year guide. The outlook assumes employment levels remain flat and no further changes to the Fed funds rate, and is subject to macroeconomic uncertainty.

Paychex Financial Statement Overview

Summary

High-quality fundamentals driven by strong profitability and cash generation. Income statement strength (86) reflects steady multi-year revenue growth and durable margins, though growth is moderating. Cash flow is a standout (88) with strong and consistent free-cash-flow conversion. Balance sheet is solid (72) with low debt-to-equity in the latest period, but the unusually large reported debt swing between 2025 and 2026 adds uncertainty.

Income Statement

Very Positive

Balance Sheet

Positive

Cash Flow

Very Positive

Breakdown	May 2026	May 2025	May 2024	May 2023	May 2022
Income Statement
Total Revenue	6.51B	5.57B	5.28B	5.01B	4.61B
Gross Profit	4.84B	4.03B	3.80B	3.55B	3.26B
EBITDA	2.95B	2.49B	2.43B	2.26B	2.05B
Net Income	1.76B	1.66B	1.69B	1.56B	1.39B
Balance Sheet
Total Assets	16.17B	16.56B	10.38B	10.55B	9.64B
Cash, Cash Equivalents and Short-Term Investments	1.18B	1.66B	1.50B	1.60B	1.22B
Total Debt	4.61B	5.02B	866.30M	865.70M	881.20M
Total Liabilities	12.44B	12.44B	6.58B	7.05B	6.55B
Stockholders Equity	3.74B	4.13B	3.80B	3.49B	3.09B
Cash Flow
Free Cash Flow	2.32B	1.76B	1.74B	1.56B	1.37B
Operating Cash Flow	2.56B	1.95B	1.90B	1.70B	1.51B
Investing Cash Flow	-1.15B	-3.68B	-260.90M	218.50M	-1.42B
Financing Cash Flow	-2.65B	2.56B	-1.87B	-711.40M	-979.30M

Paychex Technical Analysis

Technical Analysis Sentiment

Positive

Last Price91.96

Price Trends

50DMA

96.06

Positive

100DMA

93.78

Positive

200DMA

103.13

Positive

Market Momentum

MACD

1.82

Negative

RSI

63.80

Neutral

STOCH

92.27

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PAYX, the sentiment is Positive. The current price of 91.96 is below the 20-day moving average (MA) of 99.86, below the 50-day MA of 96.06, and below the 200-day MA of 103.13, indicating a bullish trend. The MACD of 1.82 indicates Negative momentum. The RSI at 63.80 is Neutral, neither overbought nor oversold. The STOCH value of 92.27 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for PAYX.

Paychex Risk Analysis

Paychex disclosed 22 risk factors in its most recent earnings report. Paychex reported the most risks in the "Finance & Corporate" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Paychex Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ADP	77 Outperform	$96.84B	22.26	68.69%	2.46%	6.92%	9.71%
PAYX	75 Outperform	$37.82B	21.46	40.94%	3.70%	16.88%	6.56%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
TNET	58 Neutral	$2.54B	16.33	179.66%	1.81%	-1.40%	-0.67%
MAN	54 Neutral	$1.80B	-109.83	-0.81%	4.96%	4.77%	-115.03%
NSP	52 Neutral	$1.73B	-66.03	-32.05%	6.37%	3.04%	-140.22%
ZIP	51 Neutral	$322.83M	-13.93	32.87%	―	-3.33%	-45.12%

* Technology Sector Average

Performance Comparison

PAYX

Paychex

105.39

-34.53

-24.68%

ADP

Automatic Data Processing

239.49

-60.57

-20.19%

NSP

Insperity

44.24

-11.72

-20.95%

MAN

ManpowerGroup

38.44

-2.49

-6.09%

TNET

TriNet Group

54.70

-15.36

-21.93%

ZIP

ZipRecruiter

3.90

-1.37

-26.00%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jun 25, 2026