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Paychex Inc (NASDAQ:PAYX)

Background: Paychex is a national provider of payroll, human resource, and employee benefit outsourcing solutions for small-to medium-sized businesses. The company was founded in 1971 and is headquartered in Rochester, New York. Paychex Inc trades an average of 2.3 million shares per day with a market cap of $12.4 billion.

52 Week High: $34.66

52 Week Low: $25.20

Book Value: $4.42

Price To Book: 7.74

Investors are looking forward to improving first-quarter earnings after the market closes on September 24, 2012 The consensus opinion is presently 41 cents a share, the same as the corresponding period last year.

Analysts are more or less side stepping this one like a politician dancing the Washington two-step. A hold can mean everything from "I want to rate it a sale, but that would not be good for business", to "I have no clue". 13 out of 22 rate this a hold. 4 recommend this as a buy and 5 recommend selling.

Analysts are increasingly negative. The number of analysts issuing a sell recommendation compared to a month ago has increased. The average analyst target price for PAYX is $32.00.

The last date PAYX released earnings was June 27, 2012, and the closing price was $31.93. Based on a recent price of $34.47, shares are up 8%.

I expect Paychex to beat by at least one cent. After the massive price climb in the share price in the last couple months, the market is expecting next week's report to deliver.

The trailing twelve month price-to-earnings ratio is 22.7, the mean fiscal year estimate price-to-earnings ratio is 21.3, based on earnings of $1.61 per share this year. I'm not a fan of earnings multiples above 20, so I suggest caution and advise you don't chase this one. Waiting until a two or three day retraction is my preferred method of entry for longer term holds.

The company currently pays $1.28 per share in dividends for a yield of 3.74%. In the last three years, the average dividend paid was $1.25. While past payments don't guarantee future dividends, reviewing the past is the best way I know how to predict the most likely future outcome.

Based on the last five years, the board really enjoys raising the dividend payout. Dividends increased 10.0% on average per year. As long as the payout rate stays in check, the increases are likely to continue.

The short interest based on the float is small and not a big concern. Short interest is 3.5%.

I use Zacks.com, WSJ.com, Tradestation, and Reuters for my data. PE is generally adjusted PE based on an average number of shares.

Source: Earnings Preview For Paychex Inc