What Paychex Stock Has to Offer Ahead of Earnings

The HR staple is expected to report earnings on April 6

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When we last covered human resource and payrolls expert Paychex, Inc. (NASDAQ:PAYX) the stock was fresh off a record high wrought from top-line quarterly beat. It's that time again for the company, as it prepares to report quarterly earnings before the market opens on Tuesday, April 6. Paychex has managed to beat earnings expectations on all four of its most recent earnings reports.

For its fiscal third quarter of 2020, Paychex beat analyst estimates by a margin of $0.02 and reported an earnings per share (EPS) of $0.97. For the fourth quarter of fiscal 2020, the company decreased its EPS to $0.61, but still beat expectations by a margin of $0.01. For the following quarter, Paychex posted an increase in earnings, jumping to $0.63 per share and beating estimates by a margin of $0.08. In the most recent quarterly report, Paychex announced an EPS of $0.73 and beat expectations by $0.07.

However, due to a number of mitigating factors, the last three of AYX's post-earnings reactions have been to the negative, including a 4.9% drop back in July. In the last eight quarters, the stock averages a post-earnings move of 2.2%, regardless of direction. This time around for next Wednesday, the options market is pricing in a larger-than-usual post-earnings move of 3.5%. 

PAYX stock price is up nearly 70% in price year-over-year when the stock hit a 52-week low of $58.85. In addition, Paychex stock price has increased 10% year-to-date. Recently, shares of PAYX reached a 52-week high of $101.01. Paychex also offers shareholders a forward dividend of $2.48 and a dividend yield of 2.47%.

Paychex stock scored a record high of $101.01 back on March 26, but since then has ceded the triple-digit area. Up 54% in the last 12 months, the stock is overdue for a round of bull notes, considering nine of 11 in coverage rate PAYX a "hold" or worse.

Paychex’s total revenues in the past twelve months now total $3.98 billion. The company has also grown its net income by roughly $240 million, or 30%, since fiscal 2017, totaling $1.06 billion in the past year. Like its revenues, Paychex’s net income had also seen a small decline from what the company reported in fiscal 2020. Overall, Paychex stock may be a solid long-term option taking its dividend and steady growth rate into account. However, investors should be wary of the company’s high valuation. PAYX currently trades at a price-earnings ratio of 33.87 and Paychex stock has a forward price-earnings ratio of 32.15.

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