Paychex (PAYX) announced its Fiscal 2027 Q1 financial results for the quarter ended August 31, 2026, on September 23, 2026. After the earnings report was released, the stock price fell 8.77% to $104.490, with a market capitalization of $37.157 billion.
Revenue in Q1 Fiscal 2027 was $1.63 billion, up 6% year over year. The growth is still acceptable, although the growth rate may not be very high going forward. Revenue from the Management Solutions segment was $1.213 billion, accounting for the majority of total revenue, up 4% year over year. PEO and Insurance Solutions revenue was $368 million, up 12% year over year. Interest revenue from funds held for clients was $50 million, up 5% year over year.
Net income for the period was $430 million, up 12% year over year.
Cash flow from operations was $414 million. Accounts receivable increased, and cash flow from operations declined during the period.
Free cash flow for the period was $357 million, while dividends paid were $424 million.
Is the Stock Price Expensive?
Free cash flow in Fiscal 2026 was $2.32 billion, while stock-based compensation was $96 million. Adjusted free cash flow was therefore $2.224 billion. Based on a 20x valuation multiple, the fair value would be $44.48 billion. Considering the impact of goodwill and intangible assets, the fair value is revised downward to $42 billion.
The current TTM dividend yield is 4.34%. The stock currently appears to be at a relatively reasonable to low valuation level.
Outlook for Fiscal 2027
| Item | Latest Guidance | Previous Guidance | Status |
|---|---|---|---|
| Total Revenue Growth | 5%–6% | — | Updated |
| Management Solutions Revenue Growth | 5%–6% | — | No Change |
| PEO and Insurance Solutions Revenue Growth | 7%–8% | 6%–7% | Updated |
| Interest on Funds Held for Clients | $200 million–$210 million | $195 million–$205 million | Updated |
| Adjusted Operating Margin | Approximately 44% | — | No Change |
| Effective Tax Rate | Approximately 24% | — | No Change |
| Adjusted Diluted EPS Growth | 7%–9% | — | No Change |
