Should You Buy Paychex Stock?

April 1st, 2025 by Trefis Team

Paychex (NASDAQ:PAYX) stock has gained about 11% year-to-date, compared to the S&P 500, which remains down by about 5%. Paychex posted a better-than-expected set of Q3 FY’25 results, with earnings coming in at $1.49 per share, beating estimates and rising 8% compared to last year, while total revenues grew 5% year-over-year. The company has benefited from strength in its core Management Solutions and PEO services, with operating margins also trending higher.

 

We believe the stock appears fairly priced – making it an ambivalent pick to buy at its current price of around $150. We believe there are some minor concerns with PAYX stock, which makes it fairly priced, given that its current valuation looks high.

We arrive at our conclusion by comparing the current valuation of PAYX stock with its operating performance over recent years as well as its current and historical financial condition. Our analysis of Paychex along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a strong operating performance and financial condition, as detailed below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

How does Paychex’s valuation look vs. the S&P 500?

Going by what you pay per dollar of sales or profit, PAYX stock looks slightly expensive compared to the broader market.

• Paychex has a price-to-sales (P/S) ratio of 10.2 vs. a figure of 3.2 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 24.6 compared to 24.3 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 31.5 vs. the benchmark’s 24.3

How have Paychex’s revenues grown over recent years?

Paychex’s Revenues have grown marginally over recent years.

• Paychex has seen its top line grow at an average rate of 7.5% over the last 3 years (vs. increase of 6.3% for S&P 500)
• Its revenues have grown 4.2% from $5.2 Bil to $5.4 Bil in the last 12 months (vs. growth of 5.2% for S&P 500)
• Also, its quarterly revenues grew 4.7% to $1.3 Bil in the most recent quarter from $1.3 Bil a year ago (vs. 5.0% improvement for S&P 500)

How profitable is Paychex?

Paychex’s profit margins are considerably higher than most companies in the Trefis coverage universe.

• Paychex’s Operating Income over the last four quarters was $2.2 Bil, which represents a considerably high Operating Margin of 41.3% (vs. 13.0% for S&P 500)
• Paychex’s Operating Cash Flow (OCF) over this period was $1.7 Bil, pointing to a high OCF-to-sales ratio of 32.3% (vs. 15.7% for S&P 500)

Does Paychex look financially stable?

Paychex’s balance sheet looks strong.

• Paychex’s Debt figure was $863 Mil at the end of the most recent quarter, while its market capitalization is $54 Bil (as of 3/31/2025). This implies a very strong Debt-to-Equity Ratio of 1.6% (vs. 19.0% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $1.6 Bil of the $11 Bil in Total Assets for Paychex.  This yields a moderate Cash-to-Assets Ratio of 11.7% (vs. 14.8% for S&P 500)

How resilient is PAYX stock during a downturn?

PAYX stock has fared worse than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on PAYX stock? Our dashboard How Low Can Paychex Stock Go In A Market Crash? has a detailed analysis of how the stock performed during and after previous market crashes.

Inflation Shock (2022)

• PAYX stock fell 23.5% from a high of $141.23 on 6 April 2022 to $108.00 on 12 October 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-crisis peak by 14 October 2024
• Since then, the stock has increased to a high of $154.52 on 10 March 2025 and currently trades at around $150

Covid Pandemic (2020)

• PAYX stock fell 44.2% from a high of $90.23 on 20 February 2020 to $50.39 on 23 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-crisis peak by 9 November 2020

Global Financial Crisis (2008)

• PAYX stock fell 52.4% from a high of $42.88 on 18 October 2007 to $20.43 on 9 March 2009, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-crisis peak by 25 October 2013

Putting all the pieces together: What it means for PAYX stock

In summary, Paychex’s performance across the parameters detailed above are as follows:

• Growth: Neutral
• Profitability: Extremely Strong
• Financial Stability: Very Strong
• Downturn Resilience: Very Weak
• Overall: Strong

This is aligned with the stock’s high valuation, because of which we think it is fairly priced, which supports our conclusion that PAYX is an ambivalent stock to buy.

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