Paychex stock forecast: What’s happening?
What's the Paychex stock forecast after it hit an all-time high recently?
- The recent past
- Paychex’s quarterly results
- Paychex upbeat on future
- How the markets responded
- Paychex stock prediction
Paychex is one of those companies which, if people do not automatically know everything about it, they will certainly have heard its name somewhere.
In fact, the Rochester, New York- based business performs a key duty for companies across the US. It is one of the country’s biggest payroll, benefits and human resources (HR) providers, lending its services to small- and medium-sized companies across the US. One in eight American private-sector workers gets their pay via the business’s systems, according to Paychex.
With that in mind, let’s take a look at what it does, what it’s doing and whether we can forecast how it will perform via a Paychex stock forecast.
The recent past
Paychex recently won Human Resources Executive magazine’s ‘top HR product of the year’ award, which was the second year in a row the company had won something at the awards.
This year’s accolade was for the Paychex pre-check, a system that allows employees to check their net and gross pay before their payments go through.
In 2020, it won the ‘top HR product of the year’ prize for its Paychex Flex system, which promises users an all-in-one system for a variety of HR-related services, such as payroll, time and attendance, and benefits.
But how well the company has been doing lately? Markets can be unpredictable, so sometimes financial results will have the expected impact, while at other times markets behave in a way you would not expect.
Paychex’s quarterly results
The company issued its quarterly earnings report on the morning of 30 September. The initial news was positive.
Its total service revenue and total revenue were both up 16% year-on-year, with service revenue going up 75% from $917.3m (£676.6m, €791.1m) to $1.6084bn and total revenue rising from $932.2m to $1,082.9bn.
There was also some very good news from the company’s operating income, which rose 56% from $284m in 2020 to $442.9m in the same quarter of 2021. This, in turn, meant that year-on-year diluted earnings per share went up from $0.59 to $0.92.
The figures show that Paychex’s management solutions department brought in $805.5m for the three months ending 31 August, up 17% from the same period the previous year. The company said an increase in workers coming back to their place of employment had helped boost the money coming in, also that more businesses were using its services.
Meanwhile, the professional employer organisation (PEO) and insurance solutions division generated $262.9m, up 14% year-on-year. Paychex attributed this to more people going back to their place of work and an increase in wages, coupled with higher revenue on state unemployment insurance and an increase in PEO health insurance revenue.
The positive financial results meant shareholders received a quarterly dividend of $0.66 per share.
Paychex upbeat on future
In terms of the future, the company said it expected its total revenue and its management solutions revenue to go up by 8% over the financial year ending on 31 May 2021, while revenue from its PEO and Insurance divisions was expected to go up between 8% and 10%.
Paychex’s chief financial officer, Efrain Rivera, said the company had raised its expectations for total revenue and the money brought in by management solutions up from its previous expectation of 7%.
Paychex president and chief executive Martin Mucci said that the company’s success was down to how people had dealt with the Covid-19 pandemic.
In a post-results phone call, Mucci said: “That mission was all the more important during the challenges faced over the past 18 months.
“I'd like to thank and commend our employees for their tireless dedication to innovation and commitment to serving our clients. They have driven our growth over these 50 years. And our shareholders, we thank them for their investment with us along the way.”
Mucci also indicated that new companies starting up post-pandemic also helped the company, saying: “They're still up very strong from pre-pandemic levels, up 20%–30% over pre-pandemic levels. Now there was a big jump last first quarter and frankly, the first half of our fiscal year, as we think about it, in new business formation, they were up 40% or 50%.
“Now they're up really 20%–30% over the previous pandemic years. And we do very well with brand-new businesses. We … picked up some real positive performance in the mid-market, but we're also doing very well with brand-new clients that are starting up.”
How the markets responded
With the earnings report out, how did the markets respond?
The company’s good news saw investors’ confidence rise, pushing the Paychex stock price up. When the markets closed on 29 September, the Paychex share price stood at $107.85, but when the markets reopened on 30 September, the news from Paychex meant it had risen a little under 5.6% to hit $113.99. The Paychex share price then rallied even further to hit an intraday high of $114.65.
However, the high could not last, and the price soon dropped to an intraday low of $111.10 before heading back up to close the day at $112.45. Although this figure was lower than the price at the start of trading, it still represented a notable and – as investors will hope –sustainable point higher than where it had closed the previous day.
To put things in context, the intraday high of 30 September was the highest the Paychex stock price had been since 1 September, when it hit a high of $114.72 during the day’s trading.
For further context, the 52-week high for Paychex (PAYX) was $118.22, which it reached in intraday trading on 16 August.
This suggests that the Paychex value dipped from a high, but the recent results will have boosted confidence in the company, sending its share price back not too far from its more recent highs. The highest-ever closing price for the stock was on 16 August, when it finished the day at $118.19.
Paychex stock prediction
Despite the upbeat Paychex stock news coming out of the quarterly results, the PAYX stock forecast remained a rather cautious one.
When CNN Money surveyed 17 analysts for their Paychex stock predictions, the median result saw a slight drop of 0.4% to $112. The highest Paychex stock prediction for 2021 and 2022 would see the Paychex share price go up by 11.2% to $125, while the most pessimistic Paychex stock analysis predicted that the PAYX stock price would drop by 13.7% to $97.
When the news giant asked 22 experts for their Paychex stock recommendations, the overwhelming majority (15) said people should hold on to the stock for the time being. Meanwhile, three experts recommended buying Paychex stock.
Not one of the experts said the shares would outperform expectations, but two analysts said it would underperform expectations and therefore recommended selling shares in Paychex.
It's hard to say. The predictions are somewhat muted, and while the majority of analysts recommending holding, rather than buying or selling, you will still have to do your own research to make sure you make the right decisions about investing.
It all depends on whether you think that the company can continue to push up and eventually overtake its recent all-time high or not. If you do, it might be.
Even then, remember that prices can go down as well as up, also that you should never invest more money than you can afford to lose.
It is hard to find a Paychex stock forecast for that far in the future. However, note that AIPickup suggests Paychex will reach $214.31 at some point in 2025, while gov.capital says Paychex stock should be worth about $434.20 on 1 October 2025.
Nevertheless, predictions – especially ones for so far in the future – can very often be wrong.