Stock Analysis

Paychex, Inc. (NASDAQ:PAYX) Just Reported Third-Quarter Earnings: Have Analysts Changed Their Mind On The Stock?

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Paychex, Inc. (NASDAQ:PAYX) came out with its quarterly results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. Results were roughly in line with estimates, with revenues of US$1.4b and statutory earnings per share of US$1.38. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Paychex

NasdaqGS:PAYX Earnings and Revenue Growth April 4th 2024

Taking into account the latest results, the consensus forecast from Paychex's 18 analysts is for revenues of US$5.55b in 2025. This reflects a credible 6.4% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to rise 7.8% to US$4.97. In the lead-up to this report, the analysts had been modelling revenues of US$5.64b and earnings per share (EPS) of US$5.01 in 2025. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$121. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Paychex, with the most bullish analyst valuing it at US$130 and the most bearish at US$111 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Paychex's revenue growth is expected to slow, with the forecast 5.1% annualised growth rate until the end of 2025 being well below the historical 7.1% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 6.3% annually. Factoring in the forecast slowdown in growth, it seems obvious that Paychex is also expected to grow slower than other industry participants.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at US$121, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Paychex. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Paychex going out to 2026, and you can see them free on our platform here..

We also provide an overview of the Paychex Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

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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.