INVESTMENT CONCLUSION:
We maintain our NEUTRAL rating on Paychex following better than forecast first
quarter results. Paychex lacks a immediate catalyst as new business formation remains
muted and margins are held back by investments. There is the potential that the
company loses market share to technology based vendors over the longer term, but we
have yet to see clear cut evidence supporting this thesis. The multiple for the stock is
expensive given its earnings growth profile, but is supported by a healthy dividend and
recurring revenue base making it unlikely there will be a short term contraction.
For more information, please contact:
Joseph D. Foresi
617-557-2972
