Oppenheimer: PAYX Sales Activity Remains Tepid

Oppenheimer reports that after Paychex Inc. PAYX implemented various internal Sales initiatives in the fall, “new sales activity remained tepid during the key 3Q:FY11 selling season; partially due to continued depressed new business formation.” “Unfortunately, another year of decreased customer count will likely adversely impact FY12 core payroll growth,” Oppenheimer writes. “That said, PAYX should benefit once the small business environment normalizes; however, evidence of improving sales will likely prove very gradual. Several core business metrics such as checks/client, retention and revenue/check continue to improve and the pricing environment appears relatively stable. “The acquisition of SurePayroll should help offset slower growth in FY12 and our estimates remain unchanged. We believe PAYX is fairly valued, trading at 21x our FY12 estimate.” Paychex currently trades at $31.00.