We assign a fundamental rating of 6 out of 10 to PAYX. PAYX was compared to 87 industry peers in the Professional Services industry. While PAYX belongs to the best of the industry regarding profitability, there are some minor concerns on its financial health. PAYX is not valued too expensively and it also shows a decent growth rate. PAYX also has an excellent dividend rating.

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1. Profitability

2. Health

3. Growth

4. Valuation

5. Dividend

1. Profitability

1.1 Basic Checks

In the past year PAYX was profitable.
In the past year PAYX had a positive cash flow from operations.
PAYX had positive earnings in each of the past 5 years.
PAYX had a positive operating cash flow in each of the past 5 years.

1.2 Ratios

Looking at the Return On Assets, with a value of 9.66%, PAYX is in the better half of the industry, outperforming 78.16% of the companies in the same industry.
PAYX's Return On Equity of 41.13% is amongst the best of the industry. PAYX outperforms 93.10% of its industry peers.
PAYX has a better Return On Invested Capital (19.25%) than 89.66% of its industry peers.
The Average Return On Invested Capital over the past 3 years for PAYX is significantly above the industry average of 12.02%.
The last Return On Invested Capital (19.25%) for PAYX is well below the 3 year average (28.05%), which needs to be investigated, but indicates that PAYX had better years and this may not be a problem.

		Industry Rank	Sector Rank
ROA	9.66%
ROE	41.13%
ROIC	19.25%

ROA(3y)13.68%

ROA(5y)13.48%

ROE(3y)43.07%

ROE(5y)42.31%

ROIC(3y)28.05%

ROIC(5y)28.53%

1.3 Margins

PAYX has a better Profit Margin (26.45%) than 94.25% of its industry peers.
In the last couple of years the Profit Margin of PAYX has grown nicely.
The Operating Margin of PAYX (39.76%) is better than 98.85% of its industry peers.
In the last couple of years the Operating Margin of PAYX has grown nicely.
With an excellent Gross Margin value of 91.14%, PAYX belongs to the best of the industry, outperforming 98.85% of the companies in the same industry.
In the last couple of years the Gross Margin of PAYX has remained more or less at the same level.

		Industry Rank	Sector Rank
OM	39.76%
PM (TTM)	26.45%
GM	91.14%

OM growth 3Y1.57%

OM growth 5Y2.95%

PM growth 3Y-0.51%

PM growth 5Y1.82%

GM growth 3Y-0.99%

GM growth 5Y-0.7%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

The Return on Invested Capital (ROIC) is well above the Cost of Capital (WACC), so PAYX is creating value.
Compared to 1 year ago, PAYX has about the same amount of shares outstanding.
The number of shares outstanding for PAYX has been increased compared to 5 years ago.
The debt/assets ratio for PAYX is higher compared to a year ago.

2.2 Solvency

An Altman-Z score of 2.89 indicates that PAYX is not a great score, but indicates only limited risk for bankruptcy at the moment.
Looking at the Altman-Z score, with a value of 2.89, PAYX is in line with its industry, outperforming 55.17% of the companies in the same industry.
PAYX has a debt to FCF ratio of 2.53. This is a good value and a sign of high solvency as PAYX would need 2.53 years to pay back of all of its debts.
With a decent Debt to FCF ratio value of 2.53, PAYX is doing good in the industry, outperforming 70.11% of the companies in the same industry.
PAYX has a Debt/Equity ratio of 1.18. This is a high value indicating a heavy dependency on external financing.
PAYX has a worse Debt to Equity ratio (1.18) than 71.26% of its industry peers.

		Industry Rank	Sector Rank
Debt/Equity	1.18
Debt/FCF	2.53
Altman-Z	2.89

ROIC/WACC2.31

WACC8.33%

2.3 Liquidity

PAYX has a Current Ratio of 1.27. This is a normal value and indicates that PAYX is financially healthy and should not expect problems in meeting its short term obligations.
With a Current ratio value of 1.27, PAYX perfoms like the industry average, outperforming 41.38% of the companies in the same industry.
PAYX has a Quick Ratio of 1.27. This is a normal value and indicates that PAYX is financially healthy and should not expect problems in meeting its short term obligations.
With a Quick ratio value of 1.27, PAYX perfoms like the industry average, outperforming 41.38% of the companies in the same industry.

		Industry Rank	Sector Rank
Current Ratio	1.27
Quick Ratio	1.27

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WACC

Debt/Equity

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Altman-Z score

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3. Growth

3.1 Past

The Earnings Per Share has been growing slightly by 7.50% over the past year.
The Earnings Per Share has been growing by 10.74% on average over the past years. This is quite good.
The Revenue has grown by 12.37% in the past year. This is quite good.
PAYX shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 6.64% yearly.

EPS 1Y (TTM)7.5%

EPS 3Y9.82%

EPS 5Y10.74%

EPS Q2Q%10.53%

Revenue 1Y (TTM)12.37%

Revenue growth 3Y6.51%

Revenue growth 5Y6.64%

Sales Q2Q%18.28%

3.2 Future

The Earnings Per Share is expected to grow by 8.20% on average over the next years. This is quite good.
The Revenue is expected to grow by 8.20% on average over the next years. This is quite good.

EPS Next Y12.44%

EPS Next 2Y10.02%

EPS Next 3Y8.92%

EPS Next 5Y8.2%

Revenue Next Year16.92%

Revenue Next 2Y11.27%

Revenue Next 3Y9.48%

Revenue Next 5Y8.2%

3.3 Evolution

The EPS growth rate is decreasing: in the next years the growth will be less than in the last years.
The Revenue growth rate is accelerating: in the next years the growth will be better than in the last years.

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4. Valuation

4.1 Price/Earnings Ratio

With a Price/Earnings ratio of 19.99, PAYX is valued on the expensive side.
63.22% of the companies in the same industry are more expensive than PAYX, based on the Price/Earnings ratio.
PAYX's Price/Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 28.30.
With a Price/Forward Earnings ratio of 17.11, PAYX is valued on the expensive side.
Based on the Price/Forward Earnings ratio, PAYX is valued a bit cheaper than 60.92% of the companies in the same industry.
Compared to an average S&P500 Price/Forward Earnings ratio of 25.57, PAYX is valued a bit cheaper.

		Industry Rank	Sector Rank
PE	19.99
Fwd PE	17.11

4.2 Price Multiples

The rest of the industry has a similar Enterprise Value to EBITDA ratio as PAYX.
Compared to the rest of the industry, the Price/Free Cash Flow ratio of PAYX indicates a somewhat cheap valuation: PAYX is cheaper than 71.26% of the companies listed in the same industry.

		Industry Rank	Sector Rank
P/FCF	18.92
EV/EBITDA	14.63

4.3 Compensation for Growth

The PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a correct valuation of the company.
PAYX has an outstanding profitability rating, which may justify a higher PE ratio.

PEG (NY)1.61

PEG (5Y)1.86

EPS Next 2Y10.02%

EPS Next 3Y8.92%

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5. Dividend

5.1 Amount

PAYX has a Yearly Dividend Yield of 4.23%, which is a nice return.
Compared to an average industry Dividend Yield of 1.46, PAYX pays a better dividend. On top of this PAYX pays more dividend than 90.80% of the companies listed in the same industry.
Compared to an average S&P500 Dividend Yield of 1.82, PAYX pays a better dividend.

		Industry Rank	Sector Rank
Dividend Yield	4.23%

5.2 History

On average, the dividend of PAYX grows each year by 10.17%, which is quite nice.
PAYX has paid a dividend for at least 10 years, which is a reliable track record.
PAYX has not decreased their dividend for at least 10 years, which is a reliable track record.

Dividend Growth(5Y)10.17%

Div Incr Years11

Div Non Decr Years11

5.3 Sustainability

PAYX pays out 95.21% of its income as dividend. This is not a sustainable payout ratio.
The dividend of PAYX is growing, but the earnings are growing slower. This means the dividend growth is not sustainable.

DP95.21%

EPS Next 2Y10.02%

EPS Next 3Y8.92%

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PAYCHEX INC / PAYX FAQ

Can you provide the ChartMill fundamental rating for PAYCHEX INC?

ChartMill assigns a fundamental rating of 6 / 10 to PAYX.

What is the valuation status of PAYCHEX INC (PAYX) stock?

ChartMill assigns a valuation rating of 5 / 10 to PAYCHEX INC (PAYX). This can be considered as Fairly Valued.

What is the profitability of PAYX stock?

PAYCHEX INC (PAYX) has a profitability rating of 9 / 10.

Can you provide the PE and PB ratios for PAYX stock?

The Price/Earnings (PE) ratio for PAYCHEX INC (PAYX) is 19.99 and the Price/Book (PB) ratio is 9.57.

How financially healthy is PAYCHEX INC?

The financial health rating of PAYCHEX INC (PAYX) is 4 / 10.