Argus Upgrades Paychex To Buy; Believes Company Has Room To Expand Core Business
In a research note released Friday, Argus analyst John Eade upgraded his rating on Paychex (NASDAQ:PAYX) to a Buy rating from a Hold with a $49 price target as the company’s shares have outperformed the market over the past quarter.
Eade wrote, “Paychex Inc. is a provider of payroll, human resource services, retirement services, and insurance services to small and medium-size firms. Most of Paychex’s operations are domestic, though the company has limited exposure to Europe. The company has consistently earned high returns on invested capital, maintained a solid balance sheet, and generated healthy free cash flow that can be returned to shareholders. We also believe that Paychex has room to grow its core business: serving small companies with fewer than 50 employees. This segment remains underpenetrated and the economics of outsourcing payroll and HR services remain favorable. We also expect the company to benefit over time from rising short-term interest rates, which should increase earnings on funds held for clients. In addition, Paychex should benefit from the implementation of the Affordable Care Act, as it launches solutions to help with increasingly complex healthcare mandates. The shares have fallen from 52-week highs and appear attractive in the lower $40s.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst John Eade has a total average return of 15.4% and a 71.9% success rate. Eade is ranked #107 out of 3343 analysts.