Rochester, New York-based Paychex, Inc. (PAYX) provides integrated human capital management solutions (HCM) for payroll, benefits, human resources (HR), and insurance services for small to medium-sized businesses. With a market cap of $51 billion, Paychex's operations span the United States, Europe, and internationally.
Paychex has underperformed the broader market over the past year. PAYX stock has gained 19.1% on a YTD basis and 19.4% over the past 52 weeks, lagging behind the S&P 500 Index’s ($SPX) surge of 24.1% on a YTD basis and 30.1% over the past 52 weeks.
Narrowing the focus, Paychex has also underperformed the Technology Select Sector SPDR Fund’s (XLK) 20.1% gains in 2024 and 24.6% returns over the past year.
Although Paychex has lagged behind the broader market over the past year, it has showcased impressive resilience recently. PAYX stock price surged 4.9% after the release of its better-than-expected Q1 earnings on Oct. 1. Given the U.S. labor market is gradually returning to its pre-pandemic levels and wage inflation has moderated, Paychex is off to a solid start in fiscal 2025, the company reported a 2.5% year-over-year growth in total revenues, reaching $1.3 billion, surpassing analysts’ topline projections. Professional employer organization and insurance solutions revenues have surged 7.2% to $319.3 million. Meanwhile, Paychex maintained a strong expense discipline, reporting a notable 1.8% increase in adjusted EPS to $1.16, exceeding Wall Street’s expectations.
Paychex has continued to invest in its go-to-market capabilities and products to drive innovation that meets the realities of the post-pandemic marketplace. It introduced several new products: Paychex Flex Engage, Paychex Flex Perks, and Paychex Recruiting Copilot, demonstrating the company's approach toward growth and innovation. These digital and AI-driven solutions are designed to help its clients attract new talent and retain and strengthen their workforce.
For the current fiscal year, ending in May 2025, analysts expect Paychex to report a 5.5% year-over-year growth in adjusted EPS to $4.98. Moreover, the company has a robust earnings surprise history. It has surpassed analysts’ earnings estimates in the past four quarters.
PAYX has a consensus “Hold” rating overall. Among the 18 analysts covering the stock, 15 recommend “Hold,” one advises “Moderate Sell,” and two suggest a “Strong Sell” rating.
This configuration has been consistent over the past months.
On Oct. 2, Citigroup Inc. (C) analyst Peter Christiansen maintained a “Neutral” rating and a price target of $145, representing a premium of only 2.2% to current price levels.
As of writing Paychex is trading above its mean price target of $133.60. The Street-high price target of $148 suggests a potential upside of just 4.4% to current price levels.
