Paychex Downgraded by Credit Suisse (PAYX)

Paychex Downgraded by Credit Suisse (PAYX)

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Credit Suisse has downgraded outsourcing solutions company, Paychex, Inc.(PAYX) to “Neutral” on Thursday.

The firm has downgraded the company from an “Outperform” to “Neutral,” and has lowered its price target from $36 to $35. This price target suggests a 9.8% increase over the stock’s current price of $31.56.

An analyst from the firm 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 shares were mostly flat during Thursday morning trading. The stock is up 4.75% YTD.

The Bottom Line
Shares of Paychex (PAYX) have a 4.18% dividend yield, based on last night’s closing stock price of $31.55. The stock has technical support in the $29-$30 price area. If the shares can firm up, we see overhead resistance around the $33-$34 price levels.

Paychex, Inc.(PAYX) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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