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Paychex, Inc. (PAYX)

Fair Value
TechnologySoftware - ApplicationUnited States

Fundamental

70

Price

$98.50

Market Cap

$36.16B

Part 1 · What the company is worth

Overview

Paychex runs payroll and handles human resources administration for small and mid-sized businesses in the United States, calculating pay, filing payroll taxes and managing benefits enrolment so a business owner does not have to. Alongside that core service it sells a professional employer organisation (PEO) offering, where Paychex becomes the legal co-employer of a client's staff, taking on compliance and offering access to larger-scale health and workers' compensation insurance plans.

How it makes money

Most revenue is recurring fees charged per employee per pay period for payroll processing and related HR services, so revenue grows both from adding new clients and from clients adding employees. The PEO business earns a fee built into the insurance premiums it administers, and the company also earns interest on client funds it holds briefly between collecting payroll taxes from a business and remitting them to tax authorities, so its results have some sensitivity to interest rates.

Revenue by segment

Management Solutions75.18%

Core payroll processing, tax filing, HR administration and related software services sold to small and mid-sized businesses.

PEO and Insurance Solutions24.82%

Professional employer organisation services, where Paychex co-employs a client's staff, plus workers' compensation and related insurance offerings.

Competitive moat

Switching costs · Narrow

Payroll touches tax filings, benefits and compliance obligations that a small business owner does not want to risk getting wrong, so once a client is set up on Paychex, moving to a competitor is a real, disruptive project rather than a casual switch. The moat is narrow rather than wide because ADP, Gusto, Rippling and other well-capitalised rivals compete hard for new clients, especially smaller ones with simpler needs.

What drives demand

Moderately cyclical

Existing clients keep paying recurring fees regardless of the economic cycle as long as they stay in business and keep employees on payroll, which makes the base revenue fairly resilient. New client growth and total employee counts at existing clients do track the broader economy, however, since a slowdown that reduces small-business formation or hiring shows up directly in Paychex's growth rate.

Key risks

  • Competition from established and newer HCM providers — ADP, Gusto, Rippling and other human capital management platforms compete aggressively for small and mid-sized business clients, pressuring pricing and making client retention harder to take for granted.
  • Integration of the Paycor acquisition — Paychex closed its acquisition of Paycor during fiscal 2025; combining systems, products and client bases from a large deal carries execution risk and could distract from running the core business.
  • Sensitivity of float income to interest rates — Interest earned on client funds held briefly before remittance is a real part of profitability; a period of falling interest rates would reduce this income without any change in the underlying payroll business.
  • Cybersecurity and data protection — Paychex holds sensitive payroll, tax and personal data for millions of employees at its client companies; a data breach would damage trust in a business built on handling that information correctly.
  • Regulatory and tax law changes — Payroll processing must keep pace with changing federal, state and local tax and employment rules; errors or delays in adapting to new requirements create compliance risk for both Paychex and its clients.

The case for

Buyers argue that payroll is a service clients rarely switch once set up, that the Paycor acquisition adds scale and a stronger position with larger small-business clients, and that combined Management Solutions and PEO revenue growth shows the business keeps taking share even against well-funded competitors.

The case against

Sellers worry that newer, cloud-native HCM platforms are winning smaller and younger businesses away from incumbents like Paychex, that integrating Paycor could prove more disruptive than expected, and that float income built into recent results would fade if interest rates fall meaningfully.

Written by the editors, published on August 18, 2026

Direct competitors

Who this company fights with for the same customers

Compare

Generated on September 19, 2026 with claude-haiku-4-5 — shared with all users

P/E: 23.6Score: 68Market cap: $104.52B

ADP is the one primary national competitor Paychex's own 10-K alludes to, selling payroll, HR outsourcing and PEO services to the same U.S. small and mid-sized employers through ADP Run and TotalSource.

P/E: 23.2Score: 78Market cap: $9.95B

Paycom sells a single-database payroll and human capital management platform to U.S. businesses in the same mid-market size band Paychex serves with Paychex Flex and Paycor.

P/E: 29.0Score: 83Market cap: $7.62B

Paylocity competes for the same U.S. small and mid-sized payroll and HR software budgets, and is regularly shortlisted against Paychex in mid-market platform selections.

P/E: 16.8Score: 79Market cap: $74.06B

Intuit's QuickBooks Payroll targets the very small employers that are Paychex's core base, often bundled with the accounting software those firms already use.

TriNet Group, Inc.TNET

TriNet is one of the largest U.S. professional employer organizations, competing directly with the Paychex PEO for small employers that outsource payroll, benefits and HR compliance under a co-employment arrangement.

Rippling People Center, Inc.Not tracked

Rippling, still privately held, sells an all-in-one payroll, benefits and HR platform to the same U.S. small and mid-sized companies and is a frequent head-to-head alternative to Paychex.

Balance Sheet & Liquidity

Revenue

$6.39B

Trailing 12 months (through 8/31/2026)

Net Income

$1.81B

Trailing 12 months (through 8/31/2026)

Free Cash Flow

$2.32B

Total Equity

$3.74B

Total Liabilities

$12.44B

Current Ratio

1.28

Interest Coverage

9.71

Debt/EBITDA

1.56

Earnings Per Share

Revenue & Net Income

Free Cash Flow

Income Breakdown

Historical statement

Margins over time

Debt over time

How heavy the debt is

Growth grid

Growth — Revenue

Fair Value Estimation

General caseFairly Valued

Fair Value

$117.61

Current Price

$98.50

Margin of Safety

+16.2%

Fair Value Range

$89.66 - $145.56

Spread across the valuation methods used, not a statistically calibrated confidence interval.

Estimation Methods

Analyst price target:$117.29
Discounted cash flow (DCF):$156.61
Earnings multiple (P/E):$94.73
Graham growth formula:$126.76
Earnings power value (EPV):$61.39
Justified P/B:$86.07
Dividend discount (Gordon):$91.99
P/FFO, funds from operations:$99.00
Mid-cycle earnings:$170.89
Revenue multiple:$92.79
Analyst Consensus:Hold (2B / 15H / 7S)
Last Earnings Surprise:-0.48%

Valuation Metrics

P/E Ratio

19.54

ROE

47.1%

P/B Ratio

9.46

P/FCF

17.39

Gross Margin

73.5%

ROIC

21.9%

Profitability Radar

Value Creation (Economic Moat)

ROIC

21.9%

WACC

8.5%

ROIC − WACC

+13.4 pp

ROIC exceeds the cost of capital — the company is creating value for shareholders.

Fundamental Analysis Criteria

Passed (19)

  • EPS shows upward trend
  • EPS CAGR 6.55%
  • Price CAGR 5.55%
  • ROIC 21.9%
  • Gross Margin 73.5%
  • P/FCF 17.39
  • Debt/Equity ratio
  • Operating Margin 40.5%
  • Positive Free Cash Flow
  • CapEx intensity
  • Current Ratio
  • Interest Coverage
  • Debt/EBITDA
  • Return on Tangible Assets
  • ROE 45.1%
  • Revenue Growth 5Y 9.9%
  • Earnings Quality (OCF/NI) 1.25
  • Share Dilution -0.5%
  • Piotroski F-Score 7/9

Failed (8)

  • P/B Ratio 9.46
  • Low reliance on intangibles
  • Price below Graham Number
  • DCF valuation (Overvalued)
  • Analyst Consensus 8% Buy
  • Earnings Surprise avg -0.1%
  • PEG Ratio 2.11
  • Net Margin Trend 28.3% vs 28.7%

Unavailable (1)

  • Dividend Payout NaN%

Piotroski F-Score

7/9

Strong financial health

score
criteria

Earnings Quality

1.25

High quality: earnings backed by cash

Share Dilution

-0.5%

Buying back shares. Shareholder friendly

Institutional Holdings

Governance

Executive Team

NameTitleAge
Mr. John B. Gibson Jr.President, CEO & Director58
Mr. Robert Lewis SchraderSenior VP & CFO52
Mr. Ryan Norman BergstromChief Product & Technology Officer46
Mr. Chad ParodiSenior VP of HR & Benefits Services53
Mr. Adam Brooks AnteSenior Vice President of HCM44
Ms. Elizabeth RoaldsenSenior Vice President of Operations & Customer Experience53
Ms. Katy BunnChief Marketing Officer-
Mr. Mason ArgiropoulosChief Human Resources Officer47
Mr. Thomas J. HammondManaging Director of Emerging & Ancillary Services-
Mr. Bradley J. Schaufenbuel J.D., L.L.M.VP & Chief Information Security Officer52

Audit Risk

1

Board Risk

6

Compensation Risk

5

Shareholder Rights Risk

2

Part 2 · The price and when to enter

This part won't tell you whether the company is worth owning: it helps you choose when to buy it, once the fundamentals have convinced you. Inside: technical analysis, potential, historical drawdowns, gamma exposure.

Documents

  • Annual Report (10-K)

    A yearly overview of the business, its financial results, and the risks it faces.

    Filed on 2026-07-17

    View document
  • Quarterly Report (10-Q)

    A snapshot of financial performance for the most recent three-month period.

    Filed on 2026-09-24

    View document
  • Current Report (8-K)

    An announcement of a major event, such as a leadership change or big news.

    Filed on 2026-09-23

    View document

via SEC EDGAR

Income History

via SEC EDGAR

Latest News

Recent headlines for PAYX, sourced from Markets Gazette.

  • 21d agoNEUTRAL
    Nasdaq-100® Inside the Index: Paychex Inc. (PAYX)

    This article provides an in-depth analysis of Paychex Inc., a company specializing in payroll and HR services. It highlights the company's recurring revenue model, the strategic acquisition of Paycor, and potential growth avenues through AI integration. The examination also covers operational strengths, valuation metrics, and associated risks. For investors, this comprehensive review offers insights into Paychex's business fundamentals and future prospects within the Nasdaq-100 index, without presenting a specific directional outlook.

  • 3/25/2026NEUTRAL
    Paychex Gears Up For Q3 Print; Here Are The Recent Forecast Changes From Wall Street's Most Accurate Analysts

    Paychex Inc. (NASDAQ: PAYX) is scheduled to report its third-quarter earnings on March 25th. Wall Street analysts are forecasting earnings per share of $1.67 and revenue of $1.78 billion. Ahead of the print, the stock experienced a 3.1% decline, closing at $90.61 on Tuesday. The upcoming earnings report will be crucial for investors to assess the company's performance against these expectations and gauge future growth prospects.

  • 2/21/2026NEUTRAL
    Paychex: A Strong Contender in the Payroll Processing Arena

    The article dissects Paychex's business model and financial health, a leader in payroll processing. It questions whether the stock is a good investment, suggesting a fundamental analysis rather than a news with immediate market impact.

via Markets Gazette