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

Zacks Equity Research

In the latest trading session, Paychex (PAYX) closed at $82.29, marking a +1.01% move from the previous day. This change lagged the S&P 500's 1.21% gain on the day. Elsewhere, the Dow gained 0.97%, while the tech-heavy Nasdaq added 1.35%.

Coming into today, shares of the payroll processor and human-resources services provider had lost 4.81% in the past month. In that same time, the Business Services sector lost 0.9%, while the S&P 500 lost 3.6%.

Wall Street will be looking for positivity from PAYX as it approaches its next earnings report date. In that report, analysts expect PAYX to post earnings of $0.69 per share. This would mark year-over-year growth of 2.99%. Meanwhile, our latest consensus estimate is calling for revenue of $990.93 million, up 14.85% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $3.09 per share and revenue of $4.16 billion, which would represent changes of +8.8% and +10.37%, respectively, from the prior year.

It is also important to note the recent changes to analyst estimates for PAYX. 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.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate remained stagnant within the past month. PAYX is currently a Zacks Rank #3 (Hold).

In terms of valuation, PAYX is currently trading at a Forward P/E ratio of 26.41. This represents a premium compared to its industry's average Forward P/E of 19.08.

Investors should also note that PAYX has a PEG ratio of 2.93 right now. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Outsourcing industry currently had an average PEG ratio of 1.81 as of yesterday's close.

The Outsourcing industry is part of the Business Services sector. This industry currently has a Zacks Industry Rank of 151, which puts it in the bottom 42% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual 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.

Make sure to utilize Zacks. Com to follow all of these stock-moving metrics, and more, in the coming trading sessions.

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