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Paychex (PAYX) Outpaces Stock Market Gains: What You Should Know

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Paychex (PAYX - Free Report) closed at $115.79 in the latest trading session, marking a +1.92% move from the prior day. This move outpaced the S&P 500's daily gain of 1.5%. Elsewhere, the Dow gained 0.28%, while the tech-heavy Nasdaq added 0.52%.

Coming into today, shares of the payroll processor and human-resources services provider had gained 0.04% in the past month. In that same time, the Business Services sector lost 5.56%, while the S&P 500 lost 3.75%.

Investors will be hoping for strength from Paychex as it approaches its next earnings release. On that day, Paychex is projected to report earnings of $1.04 per share, which would represent year-over-year growth of 8.33%. Meanwhile, our latest consensus estimate is calling for revenue of $1.22 billion, up 9.52% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $3.64 per share and revenue of $4.49 billion, which would represent changes of +19.74% and +10.69%, respectively, from the prior year.

It is also important to note the recent changes to analyst estimates for Paychex. These revisions help to show the ever-changing nature of near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. Paychex is currently sporting a Zacks Rank of #2 (Buy).

Investors should also note Paychex's current valuation metrics, including its Forward P/E ratio of 31.25. This represents a premium compared to its industry's average Forward P/E of 15.15.

It is also worth noting that PAYX currently has a PEG ratio of 4.17. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Outsourcing industry currently had an average PEG ratio of 1.11 as of yesterday's close.

The Outsourcing industry is part of the Business Services sector. This group has a Zacks Industry Rank of 94, putting it in the top 38% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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