Does Paychex have money to sustain growth?

Paychex Dividend Yield is fairly stable at the moment as compared to the past year. Paychex reported Dividend Yield of 0.0243 in 2019. Gross Margin is likely to grow to 0.82 in 2020, whereas Net Income Per Employee is likely to drop slightly above 53.3 K in 2020. Paychex is scheduled to announce its earnings tomorrow. The upcoming quarterly report is expected on the 7th of July 2020. While some millenniums are indifferent towards business services space, it makes sense to break down Paychex. We will go over few possible ways for Paychex to generate above-average margins and lots of cash flow. Paychex Piotroski F Score is 6 - Healthy. What is Paychex Target Price Odds to finish over Current Price? Based on a normal probability distribution, the odds of Paychex to move above the current price in 30 days from now is nearly 4.75%. The Paychex probability density function shows the probability of Paychex Stock to fall within a particular range of prices over 30 days. Given the investment horizon of 30 days, the stock has beta coefficient of 1.1211 indicating Paychex market returns are sensitive to returns on the market. As the market goes up or down, Paychex is expected to follow. Additionally, the company has an alpha of 0.031, implying that it can generate a 0.031 percent excess return over DOW after adjusting for the inherited market risk (beta).
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Reviewed by Vlad Skutelnik

PAYCHEX INC currently holds roughly 853.8 M in cash with 1.3 B of positive cash flow from operations. This results in cash-per-share (CPS) ratio of 2.38. Paychex operates its asset almost 9.33 pct., making $0.0933 for each dollar of asset held by the company. An accumulating asset utilization implies the company is being more effective with each dollar of asset it holds. Put it differently asset utilization of Paychex shows how effective it operates for each dollar spent on its asset. Lets now take a look at Paychex Book Value Per Share. In accordance with the recently published financial statements the book value per share of Paychex is about 7.69 times. This is 99.98% lower than that of the Industrials sector, and significantly higher than that of Staffing & Employment Services industry, The Book Value Per Share for all stocks is 99.6% higher than the entity.
Volatility is a rate at which the price of Paychex or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of Paychex may increase or decrease. In other words, similar to Paychex's beta indicator, it measures the risk of Paychex and helps estimate the fluctuations that may happen in a short period of time. So if prices of Paychex fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility. Please read more on our technical analysis page.

How important is Paychex's Liquidity

Paychex financial leverage refers to using borrowed capital as a funding source to finance Paychex ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Paychex financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Paychex's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Paychex's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Paychex's total debt and its cash.

Paychex Volatility Drivers

Paychex unsystematic risk is unique to Paychex and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in Paychex you can also buy Broadridge Financial Solutions. You can also mitigate this risk by investing in the industrials sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing Paychex important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in Paychex income statement and balance sheet. Here are more details about Paychex volatility.
-0.251.00.860.840.9-0.7-0.590.990.980.960.440.520.27-0.10.69-0.280.09
-0.25-0.26-0.03-0.09-0.020.460.45-0.24-0.25-0.24-0.37-0.540.020.01-0.25-0.050.38
1.0-0.260.830.80.87-0.68-0.570.970.970.940.420.490.33-0.170.65-0.340.03
0.86-0.030.830.960.98-0.55-0.470.90.880.890.240.350.050.20.87-0.040.56
0.84-0.090.80.960.95-0.59-0.530.880.870.90.340.44-0.090.310.840.080.54
0.9-0.020.870.980.95-0.6-0.520.920.910.920.320.410.050.190.86-0.030.51
-0.70.46-0.68-0.55-0.59-0.60.98-0.71-0.72-0.74-0.46-0.870.31-0.34-0.43-0.310.07
-0.590.45-0.57-0.47-0.53-0.520.98-0.61-0.62-0.65-0.44-0.880.44-0.45-0.37-0.440.06
0.99-0.240.970.90.880.92-0.71-0.611.00.990.490.540.160.010.73-0.180.19
0.98-0.250.970.880.870.91-0.72-0.621.00.990.510.550.150.020.72-0.170.17
0.96-0.240.940.890.90.92-0.74-0.650.990.990.550.590.050.130.74-0.070.24
0.44-0.370.420.240.340.32-0.46-0.440.490.510.550.7-0.20.240.330.14-0.03
0.52-0.540.490.350.440.41-0.87-0.880.540.550.590.7-0.40.40.390.39-0.09
0.270.020.330.05-0.090.050.310.440.160.150.05-0.2-0.4-0.95-0.04-0.99-0.38
-0.10.01-0.170.20.310.19-0.34-0.450.010.020.130.240.4-0.950.310.960.6
0.69-0.250.650.870.840.86-0.43-0.370.730.720.740.330.39-0.040.310.090.64
-0.28-0.05-0.34-0.040.08-0.03-0.31-0.44-0.18-0.17-0.070.140.39-0.990.960.090.41
0.090.380.030.560.540.510.070.060.190.170.24-0.03-0.09-0.380.60.640.41
Click cells to compare fundamentals

Details

Paychex defends 27.61 b current valuation. The latest increase in of Paychex short term price appreciation may encourage investors to take a closer look at the company as it closed today at a share price of 77.56 on 2,983,818 in trading volume. The company directors and management have been quite successful with maneuvering the fund at opportune times to take advantage of all market conditions in June. The stock standard deviation of daily returns for 30 days investing horizon is currently 2.45. The current volatility is consistent with the ongoing market swings in June 2020 as well as with Paychex unsystematic, company-specific events.
Paychex Earnings Before Interest Taxes and Depreciation Amortization USD is increasing over the last 8 years. Also, Paychex Earnings Before Interest Taxes and Depreciation Amortization EBITDA is fairly stable at the moment.

Some Paychex technical indicators suggest bounce back

Current kurtosis is at 1.85. Paychex currently demonstrates below-verage downside deviation of 2.47. It has Information Ratio of 0.02 and Jensen Alpha of 0.03. However, we do advice investors to further question Paychex expected returns to ensure all indicators are consistent with the current outlook about its relatively low value at risk.

Our Final Take On Paychex

Despite some companies within staffing & employment services industry are still a little expensive, even after the recent corrections, Paychex may offer a potential longer-term growth to investors. To conclude, as of 6th of July 2020, our up-to-date 30 days recommendation on the company is Strong Hold. We believe Paychex is overvalued with very small odds of financial distress for the next two years. With a somewhat neutral outlook on your 30 days horizon, it may be better to hold off any trading activity and neither buy new shares of Paychex nor trade your existing holdings in the Stock. It seems the expected volatility has not yet been fully factored into the current price. Please use our equity advice module to run different scenarios to ensure your current risk level and investment horizon are fully reflective of your current investing preferences in regards to Paychex.

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