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

Zacks.com logo Zacks.com 11/23/2022

Paychex (PAYX) closed at $123.16 in the latest trading session, marking a +0.31% move from the prior day. This move lagged the S&P 500's daily gain of 0.59%. At the same time, the Dow added 0.28%, and the tech-heavy Nasdaq gained 0.01%.

Prior to today's trading, shares of the payroll processor and human-resources services provider had gained 5.41% over the past month. This has lagged the Business Services sector's gain of 7.52% and the S&P 500's gain of 6.89% in that time.

Wall Street will be looking for positivity from Paychex as it approaches its next earnings report date. On that day, Paychex is projected to report earnings of $0.97 per share, which would represent year-over-year growth of 6.59%. Meanwhile, our latest consensus estimate is calling for revenue of $1.19 billion, up 7.05% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $4.21 per share and revenue of $4.97 billion, which would represent changes of +11.67% and +7.66%, respectively, from the prior year.

Investors might also notice recent changes to analyst estimates for Paychex. These revisions help to show the ever-changing nature of near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. 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. The Zacks Consensus EPS estimate remained stagnant within the past month. Paychex currently has a Zacks Rank of #2 (Buy).

Looking at its valuation, Paychex is holding a Forward P/E ratio of 29.18. Its industry sports an average Forward P/E of 15.03, so we one might conclude that Paychex is trading at a premium comparatively.

We can also see that PAYX currently has a PEG ratio of 3.89. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. PAYX's industry had an average PEG ratio of 1.41 as of yesterday's close.

The Outsourcing industry is part of the Business Services sector. This industry currently has a Zacks Industry Rank of 68, which puts it in the top 27% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our 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.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.

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