Paychex Inc (PAYX) stock analysis

P/E below its 5-year median

Paychex's P/E of 23.0 is below its own 5-year median of 27.4.

P/E below the industry

Paychex's P/E of 23.0 is below the Engineering, Accounting, Research, Management, and Related Services median of 25.6.

EV/EBITDA below its 5-year median

Paychex's EV/EBITDA of 14.8 is below its 5-year median of 19.4.

P/B above the industry

Paychex's price-to-book of 11.11 is above the Engineering, Accounting, Research, Management, and Related Services median of 2.63.

Trading below fair value

The share price of $115.68 is below our fair value estimate of $123.43.

Margin of safety under 20%

The price is 6.3% below fair value, less than the 20% cushion we look for.

Revenue growing under 10% a year

Revenue grew 9.2% a year over the last three fiscal years, short of the 10% we look for.

EPS growing under 10% a year

Diluted EPS grew 4.4% a year over the last three fiscal years.

Earnings acceleration

Needs positive net income now, a year ago and five years ago.

Growing faster than the industry

Revenue grew 14.0% over the last twelve months; the Engineering, Accounting, Research, Management, and Related Services median is 6.2%.

Guidance raised

Paychex raised its Fiscal Year 2027 Interest on funds held for clients outlook on Sep 23, 2026.

Gross margin improving

Gross margin was 74.4% over the last twelve months, against 72.8% a year earlier.

Return on equity

Needs positive equity and five years of results.

Return on capital over 10%

Return on invested capital was 26.9%, above the 10% that usually covers the cost of capital.

Return on equity above the industry

Paychex's return on equity of 47.1% is above the Engineering, Accounting, Research, Management, and Related Services median of 1.2%.

Earnings over 5 years

Needs positive net income five years ago and in the latest year.

Net margin against its history

Needs five years of revenue and net income.

Net margin above the industry

Paychex's net margin of 27.4% is above the Engineering, Accounting, Research, Management, and Related Services median of -0.2%.

High debt

Debt is 123% of shareholders' equity, above the 40% we consider low.

Debt rising against equity

Debt to equity rose from 27.3% five years ago to 123%.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 49.4% of total debt.

Interest well covered

Operating income covers interest expense 9.7 times.

Short-term assets cover short-term debts

Current assets are 1.28 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 3.33; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Paychex paid dividends worth 4.0% of the share price over the last twelve months.

Yield below Treasuries

The 4.0% yield is below the 4.7% on a 1-year Treasury.

Yield in the top quarter

The top quarter of US dividend payers yield 3.8% or more; Paychex yields 4.0%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 10 fiscal years.

Covered by earnings

Dividends take 90.0% of net income.

Covered by free cash flow

Dividends take 80.6% of free cash flow.