Paychex Earnings: Operating Efficiency Shines Through Amid Moderating Employment and Wage Growth

Wide-moat Paychex reported reasonable third-quarter fiscal 2024 results despite headwinds from an earlier-than-expected winding down of the pandemic-era high-margin employee retention tax credit, or ERTC, services. As we anticipated, Paychex reported moderating employment and wage growth among small business customers, but the firm continues to enjoy the benefits of its strong retention rates and operational efficiency. Following the result, we maintain our $120 fair value estimate and our long-term outlook. At current prices, Paychex's shares screen as fairly valued.