Paychex, Inc. Just Beat EPS By 15%: Here's What Analysts Think Will Happen Next
As you might know, Paychex, Inc. (NASDAQ:PAYX) just kicked off its latest first-quarter results with some very strong numbers. It was overall a positive result, with revenues beating expectations by 4.9% to hit US$932m. Paychex reported statutory earnings per share (EPS) US$0.59, which was a notable 15% above what the analysts had forecast. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
View our latest analysis for Paychex
Taking into account the latest results, Paychex's 17 analysts currently expect revenues in 2021 to be US$3.94b, approximately in line with the last 12 months. Statutory earnings per share are expected to decrease 4.4% to US$2.79 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$3.89b and earnings per share (EPS) of US$2.71 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target rose 6.7% to US$79.33, suggesting that higher earnings estimates flow through to the stock's valuation as well. 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$90.00 and the most bearish at US$70.00 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 1.1%, a significant reduction from annual growth of 8.1% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 14% annually for the foreseeable future. It's pretty clear that Paychex's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Paychex following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Paychex going out to 2025, and you can see them free on our platform here..
You should always think about risks though. Case in point, we've spotted 1 warning sign for Paychex you should be aware of.
This article by Simply Wall St is general in nature. 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.
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