Paychex (PAYX) Showing Signs Of Being Water-Logged And Getting Wetter
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.
Trade-Ideas LLC identified
(
) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Paychex as such a stock due to the following factors:
- PAYX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $82.9 million.
- PAYX has traded 1.4 million shares today.
- PAYX traded in a range 233.9% of the normal price range with a price range of $1.18.
- PAYX traded below its daily resistance level (quality: 10 days, meaning that the stock is crossing a resistance level set by the last 10 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).
Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.
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More details on PAYX:
Paychex, Inc. provides payroll, human resource, insurance, and benefits outsourcing solutions for small to medium-sized businesses in the United States and Germany. The stock currently has a dividend yield of 3%. PAYX has a PE ratio of 28.2. Currently there are 2 analysts that rate Paychex a buy, 3 analysts rate it a sell, and 12 rate it a hold.
The average volume for Paychex has been 2.3 million shares per day over the past 30 days. Paychex has a market cap of $18.1 billion and is part of the services sector and diversified services industry. The stock has a beta of 0.77 and a short float of 4.7% with 9.00 days to cover. Shares are up 9.2% year-to-date as of the close of trading on Monday.
Analysis:
rates Paychex as a
. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 19.9%. Since the same quarter one year prior, revenues slightly increased by 9.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- PAYCHEX INC has improved earnings per share by 9.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PAYCHEX INC increased its bottom line by earning $1.71 versus $1.57 in the prior year. This year, the market expects an improvement in earnings ($1.85 versus $1.71).
- The net income growth from the same quarter one year ago has significantly exceeded that of the IT Services industry average, but is less than that of the S&P 500. The net income increased by 9.0% when compared to the same quarter one year prior, going from $158.70 million to $173.00 million.
- Net operating cash flow has slightly increased to $141.60 million or 6.06% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -13.42%.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full Paychex Ratings Report.
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