Paychex, Inc. PAYX is benefiting from healthy segmental performances, shareholder-friendly policies and a strong liquidity position.

What Makes Paychex an Attractive Pick?

Solid Rank: PAYX has a Zacks Rank #2 (Buy) at present. Our research shows that stocks with a Zacks Rank #1 (Strong Buy) or 2 offer attractive investment opportunities.

Northward Estimate Revisions: Six estimates for fiscal 2025 moved north in the past 60 days versus no southward revision, reflecting analysts’ confidence in the company. The Zacks Consensus Estimate for fiscal 2025 earnings has moved up slightly in the past 60 days.

Positive Earnings Surprise History: Paychex has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering an earnings surprise of 1.7%, on average.

Strong Growth Prospects: The Zacks Consensus Estimate for PAYX’s fiscal 2025 earnings is pegged at $5 per share, reflecting 5.7% year-over-year growth. Moreover, earnings are anticipated to register a 6.5% increase in fiscal 2026.

Growth Factors: The rising number of clients and clients’ employees for Human Capital Management (HCM) solutions, and worksite employees for HR solutions is benefiting Paychex’s Management Solutions segment

Professional Employer Organization (“PEO”) and Insurance Solutions are improving on the back of the rising number of average PEO worksite employees, the average wage per worksite employee, higher health insurance premiums and growing ancillary services. Driven by this robust segmental performance, Paychex’s revenues have increased, seeing a compound annual growth rate of 5.5% from fiscal 2020 to fiscal 2024.

PAYX puts consistent efforts to reward its shareholders through dividends. Despite variations in its cash reserves, the company has put consistent efforts in its pursuit of creating long-term value for investors. The company paid out dividends of $999.6 million, $1.17 billion and $1.32 billion in fiscal 2022, 2023 and 2024, respectively. Steady dividends are not only attractive to income-seeking investors but also ensure some sort of returns to investors when market conditions are not in favor.

Paychex’s current ratio (a measure of liquidity) stood at 1.39 at the end of second-quarter fiscal 2025, higher than the industry’s 1.08. The metric increased 13% from the year-ago quarter due to a rise in accounts receivable. A current ratio of more than 1 implies that the company will be able to pay off short-term obligations efficiently.

Other Stocks to Consider

A couple of other top-ranked stocks from the broader Zacks Business Services sector are AppLovin APP and UiPath PATH.

AppLovin sports a Zacks Rank of 1 at present. It has a long-term earnings growth expectation of 20%. You can see the complete list of today’s Zacks #1 Rank stocks here.

APP delivered a trailing four-quarter earnings surprise of 26.2%, on average.

UiPath currently flaunts a Zacks Rank of 1. It has a long-term earnings growth expectation of 19.3%.

PATH delivered a trailing four-quarter earnings surprise of 38.8%, on average.

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Paychex, Inc. (PAYX) : Free Stock Analysis Report

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