Is Now The Time To Look At Buying Paychex, Inc. (NASDAQ:PAYX)?

Paychex, Inc. (NASDAQ:PAYX) saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Paychex’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Paychex

What Is Paychex Worth?

According to my valuation model, Paychex seems to be fairly priced at around 8.8% below my intrinsic value, which means if you buy Paychex today, you’d be paying a fair price for it. And if you believe that the stock is really worth $151.93, then there’s not much of an upside to gain from mispricing. What's more, Paychex’s share price may be more stable over time (relative to the market), as indicated by its low beta.

Can we expect growth from Paychex?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Paychex's earnings over the next few years are expected to increase by 27%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? PAYX’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on PAYX, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Paychex has 1 warning sign we think you should be aware of.

If you are no longer interested in Paychex, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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