Head to Head Survey: Paychex (NASDAQ:PAYX) & Jacobs Solutions (NYSE:J)

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

Earnings and Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Jacobs Solutions	$12.03 billion	1.40	$289.34 million	$2.82	50.75
Paychex	$6.51 billion	6.26	$1.76 billion	$4.89	23.42

Paychex has lower revenue, but higher earnings 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.

Analyst Ratings

This is a summary of recent ratings and target prices for Jacobs Solutions and Paychex, as provided by MarketBeat.com.

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

Jacobs Solutions currently has a consensus price target of $153.70, indicating a potential upside of 7.39%. Paychex has a consensus price target of $126.76, indicating a potential upside of 10.68%. Given Paychex’s higher possible upside, analysts clearly believe Paychex is more favorable than Jacobs Solutions.

Dividends

Jacobs Solutions pays an annual dividend of $1.44 per share and has a dividend yield of 1.0%. Paychex pays an annual dividend of $4.76 per share and has a dividend yield of 4.2%. Jacobs Solutions pays out 51.1% of its earnings in the form of a dividend. 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 has increased its dividend for 4 consecutive years and Paychex has increased its dividend for 3 consecutive years.

Profitability

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

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

Insider & Institutional Ownership

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

Volatility & Risk

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

Summary

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

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.

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.