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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 $80.45, marking a +0.92% move from the previous day. The stock lagged the S&P 500's daily gain of 1.1%. Elsewhere, the Dow gained 1.05%, while the tech-heavy Nasdaq added 1.32%.

Coming into today, shares of the payroll processor and human-resources services provider had lost 6.67% in the past month. In that same time, the Business Services sector lost 2.97%, while the S&P 500 lost 5.05%.

PAYX will be looking to display strength as it nears its next earnings release. On that day, PAYX is projected to report earnings of $0.69 per share, which would represent year-over-year growth of 2.99%. Our most recent consensus estimate is calling for quarterly revenue of $990.93 million, up 14.85% from the year-ago period.

PAYX's full-year Zacks Consensus Estimates are calling for earnings of $3.09 per share and revenue of $4.16 billion. These results would represent year-over-year changes of +8.8% and +10.31%, respectively.

Any recent changes to analyst estimates for PAYX should also be noted by investors. Recent revisions tend to reflect the latest near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, 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. Within the past 30 days, our consensus EPS projection remained stagnant. PAYX is holding a Zacks Rank of #3 (Hold) right now.

Digging into valuation, PAYX currently has a Forward P/E ratio of 25.84. For comparison, its industry has an average Forward P/E of 17.1, which means PAYX is trading at a premium to the group.

Investors should also note that PAYX has a PEG ratio of 2.87 right now. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. Outsourcing stocks are, on average, holding a PEG ratio of 1.76 based on yesterday's closing prices.

The Outsourcing industry is part of the Business Services sector. This group has a Zacks Industry Rank of 108, putting it in the top 43% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.

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