Paychex (NASDAQ:PAYX) and PAE (NASDAQ:PAE) are both business services companies, but which is the better business? We will contrast the two businesses based on the strength of their risk, valuation, profitability, earnings, analyst recommendations, institutional ownership and dividends.

Institutional and Insider Ownership

69.9% of Paychex shares are held by institutional investors. Comparatively, 84.8% of PAE shares are held by institutional investors. 11.7% of Paychex shares are held by company insiders. Comparatively, 31.2% of PAE shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Volatility & Risk

Paychex has a beta of 0.92, indicating that its share price is 8% less volatile than the S&P 500. Comparatively, PAE has a beta of 1.19, indicating that its share price is 19% more volatile than the S&P 500.

Valuation and Earnings

This table compares Paychex and PAE’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Paychex $4.04 billion 8.06 $1.10 billion $3.00 30.21
PAE N/A N/A $1.46 million $0.07 138.57

Paychex has higher revenue and earnings than PAE. Paychex is trading at a lower price-to-earnings ratio than PAE, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Paychex and PAE’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Paychex 26.26% 38.70% 12.01%
PAE N/A 19.16% 1.58%

Analyst Ratings

This is a breakdown of current recommendations for Paychex and PAE, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Paychex 2 8 1 0 1.91
PAE 0 0 0 0 N/A

Paychex presently has a consensus target price of $75.92, indicating a potential downside of 16.24%. Given Paychex’s higher probable upside, analysts plainly believe Paychex is more favorable than PAE.

Summary

Paychex beats PAE on 8 of the 12 factors compared between the two stocks.

Paychex Company Profile

Paychex, Inc. provides integrated human capital management solutions for human resources (HR), payroll, benefits, and insurance services for small- to medium-sized businesses in the United States and Europe. The company offers payroll processing services; payroll tax administration services; employee payment services; and regulatory compliance services, such as new-hire reporting and garnishment processing. It also provides HR solutions, including payroll, employer compliance, HR and employee benefits administration, risk management outsourcing, and the on-site availability of a professionally trained HR representative; and retirement services administration, including plan implementation, ongoing compliance with government regulations, employee and employer reporting, participant and employer online access, electronic funds transfer, and other administrative services. In addition, the company offers cloud-based HR administration software products for employee benefits management and administration, time and attendance, recruiting, and onboarding solutions; plan administration outsourcing and state unemployment insurance services; various business services to small to medium-sized businesses comprising payroll funding and outsourcing services, which include payroll processing, invoicing, and tax preparation; and payment processing services, financial fitness programs, and a small-business loan resource center. Further, it provides insurance services for property and casualty coverage, such as workers' compensation, business-owner policies, cyber security protection, and commercial auto, as well as health and benefits coverage, including health, dental, vision, and life. The company markets and sells its services primarily through its direct sales force. Paychex, Inc. was founded in 1979 and is headquartered in Rochester, New York.

PAE Company Profile

PAE Incorporated provides integrated services to support missions worldwide. The company offers defense support services specializing in aviation and ground vehicle maintenance at various levels, including aerospace ground equipment and precision measurement equipment; exercise/event planning, staging, and life support; logistics services that include supply chain management, warehousing, and training and curriculum development; base operations support, including engineering design/project management; facility operations and trade shops; utilities operations and maintenance; IT communications; transportation; morale welfare and recreation; billeting and dining/galley operations; federal health services; and clinic management and medical professional staffing. Its services include expeditionary construction; national army and police training, and civil infrastructure support; foreign assistance and global stability operations; and criminal justice sector development. Its customers include the U.S. government, international agencies, and foreign governments. The company was founded in 1955 and is based in Arlington, Virginia.

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