Paychex (NASDAQ:PAYX) saw its stock drop nearly 10% on Wednesday following the release of its Q4 FY’25 results, where the company reported a 10% year-over-year revenue increase to $1.43 billion and adjusted earnings of $1.19 per share, a 6% rise. However, its FY’26 guidance of 16.5% to 18.5% revenue growth disappointed analysts’ expectations. The company’s recent acquisition of Paycor and the expiration of the Employee Retention Tax Credit (ERTC) program are adding to operational challenges.
Currently, Paychex has a market cap of $50 billion and a debt figure of $864 million, leading to a low debt-to-equity ratio of 1.6%. Despite strong profit margins, Paychex’s valuation appears high with a price-to-sales ratio of 10.1 compared to the S&P 500’s 3.1, and a price-to-earnings ratio of 31.6 against the benchmark’s 26.9.
Over the last three years, Paychex’s revenue has grown at an average rate of 6.6%, slightly outpacing the S&P 500’s 5.5%. However, stock resilience during downturns has shown mixed results, with notable decreases during past market crises such as the COVID-19 pandemic and the global financial crisis, raising concerns among investors.
