CIBC World Markets upgraded Paychex (PAYX) to buy from hold.
Analyst Robert Maina says his upgrade is based on improving fundamentals. He cites three factors: First, headline news about the economy has improved since December. Second, interest rates have clearly bottomed. Third, the small employer payroll market has the best long-term growth potential. He notes that the stock been stuck in a trading range for the past year. Given signs that the economy is in early stages of improving, Maina encourages investors to buy the stock ahead of further news of economic rebound.
He believes that the company can grow revenues, EPS at a compounded annual growth rate of 13% and 17% respectively, over the next five years. Maina sees $0.73 fiscal 2002 (May) EPS, $0.83 EPS in fiscal 2003 and $0.99 EPS in fiscal 2004. He sets a $49 price target on the stock.