Market Overview

Paychex Upgraded, And 2 Things That Would Further Increase Morgan Stanley's Constructive View

Paychex Upgraded, And 2 Things That Would Further Increase Morgan Stanley's Constructive View

Analysts at Morgan Stanley no longer hold a bearish view of Paychex, Inc. (NASDAQ: PAYX) after the stock's 19 percent year-to-date underperformance compared to the S&P 500's track has created a more "balanced" risk to reward profile.

Morgan Stanley's Danyal Hussain upgrades Paychex's stock rating from Underweight to Equal Weight with an unchanged $55 price target as the stock's premium to the market is now at a 9-year low. Meanwhile, the company's management has acknowledged the elevated pricing pressure from competitors which is factored into the forward-looking guidance. As such, expectations now seem to "adequately capture the stock's downside risks versus its double-digit return profile."

Also, the stock does offer a 3.7 percent dividend yield, potential for stable earnings growth and positive interest rate leverage.

But shares of Paychex could have upside beyond $55 per share for two reasons:

    1. The company's growth rate to the PEO business (approximately 11 percent of revenue) has been growing as much as 20 percent in the past few years, which would make it the highest growth rate among its peers.
    2. The company has a stated willingness to pursue an acquisition and could undertake an acquisition that is both accretive and additive to its growth rate.

Bottom line, the stock's current valuation premium of 3.8x is the lowest it has been since 2008, which gives the impression there is "little room for further multiple compression" moving forward.

Related Links:

Benzinga's Top Upgrades, Downgrades For August 16, 2017

The Market In 5 Minutes
Image Credit: By DanielPenfield (Own work) [CC BY-SA 3.0 ( or GFDL (], via Wikimedia Commons

Latest Ratings for PAYX

Oct 2019MaintainsEqual-Weight
Sep 2019Initiates Coverage OnMarket Perform
Aug 2019DowngradesEqual-WeightUnderweight

View More Analyst Ratings for PAYX
View the Latest Analyst Ratings

Posted-In: Danyal Hussain Morgan Stanley PaychexAnalyst Color News Dividends Upgrades Analyst Ratings Best of Benzinga


Related Articles (PAYX)

View Comments and Join the Discussion!

Latest Ratings

TOLGoldman SachsInitiates Coverage On42.0
KBHGoldman SachsInitiates Coverage On36.0
YEXTSunTrust Robinson HumphreyMaintains28.0
LHCGSunTrust Robinson HumphreyMaintains160.0
DLRSunTrust Robinson HumphreyMaintains140.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at

What It's Like To Sell The Low In One Of The Worst Performing Stock

The Netflix Effect Is Only Half The Story For Disney