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1. Company Snapshot

1.a. Company Description

Paychex, Inc.provides integrated human capital management solutions for human resources (HR), payroll, benefits, and insurance services for small to medium-sized businesses in the United States, Europe, and India.It offers payroll processing services; payroll tax administration services; employee payment services; and regulatory compliance services, such as new-hire reporting and garnishment processing.


The company also provides HR solutions, including payroll, employer compliance, HR and employee benefits administration, risk management outsourcing, and the on-site availability of a professionally trained HR representative; and retirement services administration, including plan implementation, ongoing compliance with government regulations, employee and employer reporting, participant and employer online access, electronic funds transfer, and other administrative services.In addition, it offers cloud-based HR administration software products for employee benefits management and administration, time and attendance, digital communication solutions, recruiting, and onboarding solutions; plan administration outsourcing and state unemployment insurance services; various business services to small to medium-sized businesses comprising payroll funding and outsourcing services, which include payroll processing, invoicing, and tax preparation; and payment processing services, financial fitness programs, and a small-business loan resource center.Further, the company provides insurance services for property and casualty coverage, such as workers' compensation, business-owner policies, cyber security protection, and commercial auto, as well as health and benefits coverage, including health, dental, vision, and life.


It markets and sells its services primarily through its direct sales force.The company was founded in 1971 and is headquartered in Rochester, New York.

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1.b. Last Insights on PAYX

The recent 3-month performance of Paychex, Inc. was negatively driven by disappointing FY'26 guidance, which seemed to offset the 10% year-over-year revenue growth and 6% adjusted earnings increase in Q4 FY'25. The company's acquisition of Paycor, a human capital management software maker, contributed to most of its gains, but failed to impress investors. Additionally, Paychex's revenue missed sales estimates, and its mixed fiscal-year guidance further dampened investor sentiment.

1.c. Company Highlights

2. Paychex Delivers Strong Q1 FY2026 Results with 17% Revenue Growth

Paychex reported a robust first quarter of fiscal 2026, with revenue reaching $1.5 billion, representing a 17% increase driven primarily by the acquisition of Paycor and higher revenue per client in the Management Solutions segment. Adjusted diluted earnings per share (EPS) grew 5% to $1.22, beating analyst estimates of $1.2. The company's adjusted operating income margin demonstrated resilience, growing 15% in the quarter despite integration expenses related to Paycor. The actual EPS figure indicates a positive surprise, reinforcing the strength of the company's operational performance.

Publication Date: Oct -02

📋 Highlights
  • Revenue Growth:: Paychex achieved 17% YoY revenue increase to $1.5 billion, driven by Paycor acquisition and higher client revenue.
  • Management Solutions Performance:: Segment revenue surged 21% to $1.2 billion, contributing 80% of total revenue with strong Paycor synergies.
  • EPS Guidance Raised:: Adjusted diluted EPS growth outlook lifted to 9-11%, exceeding initial 5% growth in Q1 ($1.22/share).
  • Operational Efficiency:: Adjusted operating income margin projected at 43%, despite 3% expense growth, reflecting integration success.
  • AI & Cross-Selling Opportunities:: AI investments boost client experiences, while Paycor's platform enables $100M+ cross-sell potential in mid/upmarket segments.

Segment Performance

The Management Solutions revenue increased 21% to $1.2 billion, driven by the Paycor acquisition and higher revenue per client. In contrast, PEO and Insurance Solutions revenue grew 3% to $329 million, with the company reporting record retention in the PEO segment. The integration of Paycor is progressing as planned, with revenue synergies exceeding initial cost synergy expectations, highlighting the potential for further growth.

Outlook and Guidance

Paychex reaffirmed its fiscal 2026 outlook, expecting total revenue to grow between 16.5% and 18.5%. Management Solutions revenue is anticipated to grow between 20% and 22%, while PEO and Insurance Solutions revenue is expected to grow between 6% and 8%. The company raised its earnings per share expectation to 9% to 11% growth, indicating confidence in its long-term growth prospects.

Valuation and Growth Prospects

With a P/E Ratio of 27.54 and an ROE of 39.99%, Paychex appears to be leveraging its profitability effectively. The company's growth prospects are further underscored by its focus on AI-driven solutions and the integration of Paycor, which is expected to drive revenue synergies. Analysts estimate next year's revenue growth at 16.9%, suggesting a continued upward trajectory. The Dividend Yield of 3.34% adds to the attractiveness of the stock, providing a relatively stable return amidst growth expectations.

Strategic Initiatives

Paychex is focusing on expanding its marketing and sales investments, along with innovation initiatives, to drive further growth. The partnership with Bill.com is another strategic move, aimed at enhancing the value proposition for small businesses through the integration of Bill.com's digital payment platform into Paychex's Flex application.

3. NewsRoom

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Groupe la Francaise Boosts Position in Paychex, Inc. $PAYX

Dec -04

Source: defenseworld.net

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Top 10 High-Yield Dividend Stocks For December 2025

Dec -01

Source: seekingalpha.com

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Paychex, Inc. $PAYX Shares Sold by Clarkston Capital Partners LLC

Nov -28

Source: defenseworld.net

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Bahl & Gaynor Inc. Has $262.44 Million Stake in Paychex, Inc. $PAYX

Nov -22

Source: defenseworld.net

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Paychex Introduces AI-Driven Participant Event Notifications for Financial Advisors

Nov -19

Source: businesswire.com

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Paychex Honored as an HCM Technology and GenAI Leader

Nov -12

Source: businesswire.com

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Paychex: Valuation Makes Sense, Overselling May Attract Buying Volume

Nov -06

Source: seekingalpha.com

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U.S. Small Business Employment Growth Remains Consistent as Weekly Hours Worked Reach Near-Decade High

Nov -04

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.00%)

6. Segments

Staffing & Outsourcing Services

Expected Growth: 5.0%

Paychex's Staffing & Outsourcing Services growth of 5.0% is driven by increasing demand for HR and payroll outsourcing, expansion of services to existing clients, and strategic acquisitions. The segment benefits from a strong economy, labor market growth, and businesses seeking to streamline operations, leveraging Paychex's expertise and technology.

7. Detailed Products

Paychex Flex

A cloud-based payroll and human capital management software that provides a comprehensive suite of tools for payroll processing, benefits administration, and HR management.

Paychex Online Payroll

A web-based payroll processing service that allows businesses to manage payroll, tax compliance, and benefits administration.

Paychex Time and Attendance

A time and attendance tracking system that helps businesses manage employee hours, track time off, and monitor labor costs.

Paychex Benefits Administration

A benefits administration platform that helps businesses manage employee benefits, including health insurance, retirement plans, and other employee perks.

Paychex HR

A human capital management platform that provides tools for HR management, including employee data management, performance management, and compliance support.

Paychex Accounting Services

An accounting and bookkeeping service that provides businesses with financial statement preparation, account reconciliations, and other accounting support.

8. Paychex, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Paychex, Inc. provides payroll processing services, human resources services, and benefits administration, which are essential services for businesses. The threat of substitutes is low because switching to alternative service providers can be costly and time-consuming for clients, and Paychex's services are integrated into clients' business operations.

Bargaining Power Of Customers

Paychex's clients are primarily small- to medium-sized businesses, which can be price-sensitive. However, Paychex's services are essential, and clients are likely to prioritize reliability and quality over price. This gives Paychex some pricing power, but customers still have some bargaining power due to the availability of alternative service providers.

Bargaining Power Of Suppliers

Paychex's suppliers are primarily technology providers and other service providers. These suppliers are likely to be large and have limited bargaining power over Paychex, as Paychex is a significant customer for them. Additionally, Paychex can likely switch suppliers if needed, which reduces the bargaining power of suppliers.

Threat Of New Entrants

The threat of new entrants is medium because while there are barriers to entry in the payroll processing industry, such as regulatory requirements and high start-up costs, new entrants can still emerge. However, Paychex's strong brand reputation, extensive client base, and integrated services make it difficult for new entrants to compete directly.

Intensity Of Rivalry

The intensity of rivalry in the payroll processing industry is high due to the presence of several large players, such as ADP and Paycor. These competitors offer similar services, and competition is likely to be intense on price, service quality, and innovation. Paychex must continually invest in its services and technology to remain competitive.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 18.89%
Debt Cost 5.53%
Equity Weight 81.11%
Equity Cost 8.79%
WACC 8.17%
Leverage 23.30%

11. Quality Control: Paychex, Inc. passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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TransDigm Group

A-Score: 6.4/10

Value: 3.0

Growth: 7.9

Quality: 6.7

Yield: 9.0

Momentum: 4.0

Volatility: 8.0

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Barrett Business Services

A-Score: 6.0/10

Value: 5.9

Growth: 5.6

Quality: 6.0

Yield: 2.0

Momentum: 7.0

Volatility: 9.7

1-Year Total Return ->

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PACCAR

A-Score: 6.0/10

Value: 3.7

Growth: 6.7

Quality: 6.1

Yield: 8.0

Momentum: 3.0

Volatility: 8.3

1-Year Total Return ->

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ADP

A-Score: 5.8/10

Value: 2.0

Growth: 6.8

Quality: 7.2

Yield: 4.0

Momentum: 5.0

Volatility: 10.0

1-Year Total Return ->

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Paychex

A-Score: 5.8/10

Value: 1.8

Growth: 5.8

Quality: 9.0

Yield: 6.0

Momentum: 3.0

Volatility: 9.3

1-Year Total Return ->

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Korn Ferry

A-Score: 5.8/10

Value: 6.2

Growth: 5.8

Quality: 6.3

Yield: 4.0

Momentum: 4.0

Volatility: 8.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

112.47$

Current Price

112.47$

Potential

-0.00%

Expected Cash-Flows