Markets

Paychex (PAYX) Gains But Lags Market: What You Should Know

Paychex (PAYX) closed the most recent trading day at $64.92, moving +1.18% from the previous trading session. This move lagged the S&P 500's daily gain of 1.86%. Elsewhere, the Dow gained 1.63%, while the tech-heavy Nasdaq added 2.95%.

Prior to today's trading, shares of the payroll processor and human-resources services provider had lost 12.81% over the past month. This has lagged the Business Services sector's loss of 10.74% and the S&P 500's loss of 8.85% in that time.

Investors will be hoping for strength from PAYX as it approaches its next earnings release, which is expected to be December 20, 2018. The company is expected to report EPS of $0.63, up 6.78% from the prior-year quarter. Meanwhile, our latest consensus estimate is calling for revenue of $858.27 million, up 3.84% from the prior-year quarter.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $2.85 per share and revenue of $3.61 billion. These totals would mark changes of +11.76% and +6.8%, respectively, from last year.

Investors might also notice recent changes to analyst estimates for PAYX. These revisions typically reflect the latest short-term business trends, which can change frequently. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 0.29% higher. PAYX is holding a Zacks Rank of #2 (Buy) right now.

Valuation is also important, so investors should note that PAYX has a Forward P/E ratio of 22.52 right now. This valuation marks a premium compared to its industry's average Forward P/E of 16.17.

It is also worth noting that PAYX currently has a PEG ratio of 2.65. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. The Outsourcing industry currently had an average PEG ratio of 1.64 as of yesterday's close.

The Outsourcing industry is part of the Business Services sector. This industry currently has a Zacks Industry Rank of 157, which puts it in the bottom 38% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow PAYX in the coming trading sessions, be sure to utilize Zacks.com.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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