PAYX
Paychex, Inc.
$97.00
Stable Earnings Power
65%
P/Adj-EPS × Normalized Multiple
Mild
·
Conviction
Overvalued
Trading 12.7% above fair value
You pay
$97.00
Bear
$68.87
Fair
$86.08
Bull
$103.29
Bear
$68.87
-29.0%
$4.99 × 12x P/E
Fair
$86.08
-11.3%
$4.99 × 15x P/E
Bull
$103.29
+6.5%
$4.99 × 18x P/E
Key Value Driver
Normalized P/E multiple (15x base case)
Implied Market Multiple
19.4x
Summary
Our base-case estimate uses a valuation based on adjusted earnings per share and a normalized price-to-earnings multiple. We then blend that result with the average analyst price target of $112.14 from 30 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $86.08 per share.
Warnings
The company pays out 97% of its profits as dividends. That leaves little cushion — the dividend could be cut if business slows down.
Wall Street's average price target is $112.14 (from 30 analysts). Our estimate is 33% below the consensus -- consider that gap carefully.
Key Risks
- Growth DCF inappropriate — terminal value assumptions dominate
- EV/EBITDA misleading for regulated businesses where capex is mandated
- Regulatory risk is a fat tail not visible in normal multiples