Paychex Shares Still Overvalued, Says Jefferies

With shares of Paychex currently trading at 24x C17E EPS, "the stock remains one of the richest of the companies in our coverage universe."

However, Jefferies acknowledged that the gap between the stock's dividend yield and the yield on 10-year Treasurys has widened further, which has proven to be a more important factor for the stock price than fundamentals.

Paychex, a provider of payroll, human resource and benefits outsourcing solutions, reported fourth-quarter earnings and revenues generally in line with the Street, as HRS growth offset slight underperformance in the core payroll business.

Related Link: BMO Provides Some Color On Paychex Q4 Earnings

"While on the surface initial F17 guidance appears generally in line, we believe organic core payroll growth remains challenged and net income expectations are modestly below JEFe/Street," analyst Jason Kupferberg wrote in a note.

Kupferberg prefers Buy-rated Visa Inc V, Mastercard Inc MA and Paypal Holdings Inc PYPL among large-cap processors, as he highlighted that fundamentals of Paychex "are still taking a back seat."

At the time of writing, shares of Paychex were down 0.07 percent at $59.46. The analyst has a price target of $40.