Paychex (NASDAQ:PAYX) versus Jacobs Solutions (NYSE:J) Critical Survey

Paychex (NASDAQ:PAYX) and Jacobs Solutions (NYSE:J) are both large-cap industrials companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, earnings, profitability, institutional ownership, dividends and risk.

Earnings & Valuation

This table compares Paychex and Jacobs Solutions”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Paychex	$6.51 billion	6.34	$1.76 billion	$4.89	23.75
Jacobs Solutions	$14.22 billion	1.19	$289.34 million	$2.82	50.74

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

Profitability

This table compares Paychex and Jacobs Solutions’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Paychex	27.03%	50.90%	11.87%
Jacobs Solutions	2.40%	23.96%	7.02%

Volatility & Risk

Paychex has a beta of 0.82, indicating that its share price is 18% less volatile than the S&P 500. Comparatively, Jacobs Solutions has a beta of 0.7, indicating that its share price is 30% less volatile than the S&P 500.

Institutional and Insider Ownership

83.5% of Paychex shares are held by institutional investors. Comparatively, 85.7% of Jacobs Solutions shares are held by institutional investors. 0.6% of Paychex shares are held by insiders. Comparatively, 0.5% of Jacobs Solutions shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Dividends

Paychex pays an annual dividend of $4.76 per share and has a dividend yield of 4.1%. Jacobs Solutions pays an annual dividend of $1.44 per share and has a dividend yield of 1.0%. Paychex pays out 97.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Jacobs Solutions pays out 51.1% of its earnings in the form of a dividend. Paychex has increased its dividend for 3 consecutive years and Jacobs Solutions has increased its dividend for 4 consecutive years.

Analyst Recommendations

This is a summary of current recommendations and price targets for Paychex and Jacobs Solutions, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Paychex	3	11	3	1	2.11
Jacobs Solutions	0	6	6	0	2.50

Paychex presently has a consensus price target of $126.76, indicating a potential upside of 9.17%. Jacobs Solutions has a consensus price target of $153.70, indicating a potential upside of 7.41%. Given Paychex’s higher probable upside, analysts clearly believe Paychex is more favorable than Jacobs Solutions.

Summary

Paychex beats Jacobs Solutions on 11 of the 18 factors compared between the two stocks.

About Paychex

Paychex, Inc., together with its subsidiaries, provides integrated human capital management solutions (HCM) for payroll, benefits, human resources (HR), and insurance services for small to medium-sized businesses in the United States, Europe, and India. It offers payroll processing services; payroll tax administration services; employee payment services; and regulatory compliance services, such as new-hire reporting and garnishment processing. The company also provides HR solutions, including integrated HCM technology solutions and HR advisory services through both virtual and on-site availability of a professionally trained HR representative, as well as HR support to non-payroll clients through its HR Partner Plus solution; and retirement services administration, such as 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, it offers cloud-based HR administration software products for employee benefits management and administration, time and attendance, digital communication solutions, 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, the company 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. It markets and sells its services primarily through its direct sales force. The company was founded in 1971 and is headquartered in Rochester, New York.

About Jacobs Solutions

Jacobs Solutions Inc. provides consulting, technical, engineering, scientific, and project delivery services for the government and private sectors in the United States, Europe, Canada, India, Asia, Australia, New Zealand, the Middle East, and Africa. It operates through Critical Mission Solutions, People & Places Solutions, Divergent Solutions, and PA Consulting segments. The company offers cyber, data analytics, systems and software application integration and consulting, enterprise level and mission IT, design, nuclear, and enterprise level operations and maintenance services; software development, testing, mission integration, program management, research, development, test, evaluation services, training, and environmental remediation services; and other technical consulting solutions, as well as construction and construction management services. It also provides consulting services for consumer and manufacturing, defense and security, energy and utilities, financial services, government, health and life sciences, and transport industries. The company was founded in 1947 and is headquartered in Dallas, Texas.