Paychex stock is currently trading at $118 per share, around 16% below its pre-inflation shock high of $141 seen on April 6, 2022. Despite this, the stock has the potential for gains, with strong fundamentals such as a stable job market and improving operating metrics. However, the company posted a mixed set of Q4 FY’24 results, with earnings beating estimates but revenues missing estimates. Paychex stock has seen gains of 25% since early January 2021 to around $120 now, but the increase has been inconsistent compared to the S&P 500.
The Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year over the same period. This group of stocks has provided better returns with less risk compared to the benchmark index, indicating a more stable performance. With the current uncertain macroeconomic environment, there is a question of whether Paychex stock will continue to underperform the S&P 500 over the next 12 months or see a strong jump in performance.
Returning to pre-inflation shock levels would require Paychex stock to gain about 19% from its current levels. However, economic uncertainty, with growth slowing and high interest rates, could potentially impact the stock’s performance. Our analysis captures trends in the company’s stock during turbulent market conditions and compares them to the 2008 recession, providing insights into potential future performance.
The inflation shock experienced in 2022 has led to high demand for goods, supply chain disruptions, and high inflation rates. The S&P 500 index declined more than 20% at its peak and the Fed took aggressive measures such as hiking interest rates. Since August 2023, the Fed has kept rates unchanged to prevent a recession, with rate cuts remaining a possibility in 2024.
Comparing Paychex stock performance during the 2007/2008 crisis, the stock declined almost 46% from the pre-crisis peak to the bottom in March 2009. It recovered after the crisis, rising roughly 41% by early 2010. Paychex revenues have increased from around $4.1 billion in FY’21 to about $5.3 billion in FY’24, with earnings per share also rising as margins improved.
With the Fed’s efforts to control inflation rates and market sentiment improving, there is potential for gains in Paychex stock once concerns about a potential recession are addressed. The Trefis Market Beating Portfolios offer opportunities for investors to consider investing in high-quality stocks with the potential for strong performance.
