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When Should You Buy Paychex, Inc. (NASDAQ:PAYX)?

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Paychex, Inc. (NASDAQ:PAYX) led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Paychex’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Paychex

What is Paychex worth?

The stock is currently trading at US$78.74 on the share market, which means it is overvalued by 36.67% compared to my intrinsic value of $57.61. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that Paychex’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Paychex?

NasdaqGS:PAYX Past and Future Earnings, March 26th 2019
NasdaqGS:PAYX Past and Future Earnings, March 26th 2019

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 17% over the next couple of years, the outlook is positive for Paychex. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in PAYX’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe PAYX should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

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Are you a potential investor? If you’ve been keeping tabs on PAYX for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for PAYX, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Paychex. You can find everything you need to know about Paychex in the latest infographic research report. If you are no longer interested in Paychex, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.