Paychex Upgraded, And 2 Things That Would Further Increase Morgan Stanley's Constructive View
Analysts at Morgan Stanley no longer hold a bearish view of Paychex, Inc. (NASDAQ: PAYX) after the stock's 19 percent year-to-date underperformance compared to the S&P 500's track has created a more "balanced" risk to reward profile.
Morgan Stanley's Danyal Hussain upgrades Paychex's stock rating from Underweight to Equal Weight with an unchanged $55 price target as the stock's premium to the market is now at a 9-year low. Meanwhile, the company's management has acknowledged the elevated pricing pressure from competitors which is factored into the forward-looking guidance. As such, expectations now seem to "adequately capture the stock's downside risks versus its double-digit return profile."
Also, the stock does offer a 3.7 percent dividend yield, potential for stable earnings growth and positive interest rate leverage.
But shares of Paychex could have upside beyond $55 per share for two reasons:
Bottom line, the stock's current valuation premium of 3.8x is the lowest it has been since 2008, which gives the impression there is "little room for further multiple compression" moving forward.
Related Links:
Benzinga's Top Upgrades, Downgrades For August 16, 2017
The Market In 5 Minutes
________
Image Credit: By DanielPenfield (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0) or GFDL (http://www.gnu.org/copyleft/fdl.html)], via Wikimedia Commons
Latest Ratings for PAYX
Aug 2017 | Morgan Stanley | Upgrades | Underweight | Equal-Weight |
Jul 2017 | William Blair | Downgrades | Outperform | Market Perform |
Jun 2017 | Goldman Sachs | Downgrades | Buy | Neutral |
View More Analyst Ratings for PAYX
View the Latest Analyst Ratings
See more from Benzinga
Sorry Snap Investors, But Some Say This Rebound Is Short-Lived
Twilio Reducing Its Reliance On Uber, And That's A Good Thing
© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.