Buffett Brain · Research note
Score updated 26 Sept 2026
PAYX· Industrials
Paychex
Paychex's 73.9% gross margin and 30.7% 5-year average ROIC indicate a strong moat, but valuation and management quality raise questions.
Buffett fit
Strong fit
Owner
100
Durability
88
Management
53
Price
54
Score updated 26 Sept 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Industrials stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
If we owned 100% of Paychex, we'd appreciate its strong from essential services, reflected in a 73.9% and a 17.8% .
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Paychex shows durability with consistent profitability over the last five years and a maximum EPS decline of just -1.92%.
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Management has maintained a stable share count with a CAGR of 0.02%, indicating disciplined .
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With a of 19.7 and an earnings yield of 4.92%, Paychex is priced for moderate growth.
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- What would change the call
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
8- 173.9% is top-quintile in sector.
- 230.7% 5-year average indicates strong capital efficiency.
- 325.8% net margin shows effective cost management.
- 45-year EPS CAGR of 10.82% suggests steady growth.
Concerns
8- 1 of 19.7 suggests the stock is priced for growth beyond historical EPS CAGR.
- 2Dividend CAGR of -2.68% raises questions about capital return strategy.
- 3Current ratio of 1.26 is below the preferred 1.5 threshold for short-term liquidity.
- 4 yield of 0.35% is low, indicating limited share repurchases.
Price history
$113-9.0%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
Paychex provides human capital management solutions, including payroll, HR, and benefits services primarily for small to medium-sized businesses. They generate revenue through payroll processing, HR solutions, and cloud-based administration software. With a 25.8% net margin and $1.66B net income, the unit economics are strong, supported by from essential services.
How this analysis has moved
The call has held across 3 reviews.
Oct 11, 2026 → Oct 21, 2026
What other investors would say
The same company, judged by three other documented playbooks.
Keep researching
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