Morgan Stanley Maintains Underweight on Paychex

Morgan Stanley is out with its report today on Paychex PAYX, maintaining Underweight. In a note to clients, Morgan Stanley writes, "PAYX continues to deliver solid execution in a challenging market as evidenced by a simultaneous increase in pricing and rising client satisfaction scores. However, tepid new business starts deprive the company of one of its historically strong growth engines. With shares trading at a 21x CY11 P/E, we think that the outlook for total services revenue growth of 5-7% in F12 on an organic basis (recent acquisitions will contribute another ~2%) is enough to support recent sentiment, but is unlikely to drive a sustainable increase in valuation multiples." Morgan Stanley maintains a $28 PT on PAYX. Shares of PAYX closed Wednesday at $29.71.