Stock Analysis

Paychex, Inc. (NASDAQ:PAYX) is largely controlled by institutional shareholders who own 74% of the company

NasdaqGS:PAYX
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Key Insights

  • Institutions' substantial holdings in Paychex implies that they have significant influence over the company's share price
  • 50% of the business is held by the top 14 shareholders
  • Insider ownership in Paychex is 11%

To get a sense of who is truly in control of Paychex, Inc. (NASDAQ:PAYX), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 74% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.

In the chart below, we zoom in on the different ownership groups of Paychex.

See our latest analysis for Paychex

ownership-breakdown
NasdaqGS:PAYX Ownership Breakdown April 16th 2024

What Does The Institutional Ownership Tell Us About Paychex?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Paychex already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Paychex's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NasdaqGS:PAYX Earnings and Revenue Growth April 16th 2024

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Paychex. From our data, we infer that the largest shareholder is B. Golisano (who also holds the title of Top Key Executive) with 10% of shares outstanding. Its usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we're glad to see a company insider play the role of a key stakeholder. With 8.5% and 7.8% of the shares outstanding respectively, The Vanguard Group, Inc. and BlackRock, Inc. are the second and third largest shareholders.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 14 shareholders, meaning that no single shareholder has a majority interest in the ownership.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Paychex

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own a reasonable proportion of Paychex, Inc.. It is very interesting to see that insiders have a meaningful US$4.7b stake in this US$44b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 15% stake in Paychex. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Paychex better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

Valuation is complex, but we're helping make it simple.

Find out whether Paychex is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.