UPDATE: Credit Suisse Downgrades Paychex to Neutral on Valuation, Outlook

Credit Suisse reduced its rating on Paychex

from Outperform to Neutral and lowered its price target from $36 to $35. Credit Suisse commented, "We downgrade PAYX to Neutral from Outperform and are trimming our target price to $35 from $36. While we are constructive on PAYX's business model and its strong FCF generation, we see downside risk to our estimates, given a lackluster environment for new business formation in the United States. With prospects for growth acceleration limited, and the shares trading at 19 times our FY2014E EPS, we prefer to move to the sidelines. … Shares of PAYX currently trade at a premium to the peer group average of 15 times. The premium valuation reflects the company's recurring revenue business, high margins, strong free cash flow and outsized dividend (>80% payout ratio)." Paychex closed at $31.12 on Wednesday.