Paychex (PAYX) Stock Closed Up Today After BMO Capital Markets Price Target Raise

Paychex (PAYX) stock closed higher after BMO Capital Markets increased its price target to $51 from $49, while maintaining its 'market perform' rating.

Author:: Krysta Michaelides
Publish date:: Feb 24, 2015 4:14 PM EST

NEW YORK (TheStreet) -- Paychex (PAYX) - Get Report stock closed up 0.87% to $49.96 Tuesday after BMO Capital Markets increased its price target to $51 from $49, while maintaining its "market perform" rating.

According to BMO, continuing complexity in HR compliance and employment law as well as issues pertaining to the Affordable Care Act (ACA) will continue to lead businesses down the path of HR outsourcing.

"The company's core payroll business is solid, in our view, and recent investments in technology have improved its competitive positioning," analysts said.

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Paychex reported earnings of $1.71 per share in fiscal year 2014, versus $1.60 per share in 2013. It also reported higher revenue of $2.51 billion in 2014 versus $2.32 billion in 2013.

Analysts estimate earnings of $1.85 per share and $2 per share in 2015 and 2016, respectively. In addition, the firm forecasts revenue of $2.73 billion and $2.89 billion in 2015 and 2016, respectively.

Paychex is a provider of integrated payroll, human resource, insurance, and benefits outsourcing solutions for small- to medium-sized businesses.

Separately, TheStreet Ratings team rates PAYCHEX INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate PAYCHEX INC (PAYX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. 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 analysis by TheStreet Ratings Team goes as follows:

The revenue growth greatly exceeded the industry average of 20.7%. 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. In addition, PAYCHEX INC has also vastly surpassed the industry average cash flow growth rate of -71.36%.
The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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 analysis from the report here: PAYX Ratings Report