PAYX – Market expectations are for Uniform ROA to expand to record highs, but management may have concerns about product demand, growth opportunities, and investments

February 22, 2022

  • Paychex, Inc. (PAYX) currently trades at a historical high and above corporate averages relative to Uniform earnings, with a 29.1x Uniform P/E (Fwd V/E’).
  • At these levels, markets are pricing in expectations for Uniform ROA to expand to record highs, accompanied by 5% Uniform asset growth.

  • Similarly, analysts expect Uniform ROA to improve to 70% in 2023, accompanied by 2% Uniform asset growth.

  • If sustained going forward, these levels would imply a stock price closer to $83, representing approximately 31% equity downside for the firm.

  • Moreover, the firm’s most recent earnings call suggests management may have concerns about product demand, growth opportunities, and investments.

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