Contrasting Block (NYSE:XYZ) & Paychex (NASDAQ:PAYX)

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

Analyst Recommendations

This is a summary of current ratings and recommmendations for Paychex and Block, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Paychex	3	14	1	0	1.89
Block	1	10	23	3	2.76

Paychex presently has a consensus target price of $125.67, indicating a potential upside of 13.03%. Block has a consensus target price of $82.82, indicating a potential upside of 25.56%. Given Block’s stronger consensus rating and higher possible upside, analysts plainly believe Block is more favorable than Paychex.

Insider & Institutional Ownership

83.5% of Paychex shares are held by institutional investors. Comparatively, 70.4% of Block shares are held by institutional investors. 0.8% of Paychex shares are held by insiders. Comparatively, 10.5% of Block shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Paychex	$5.57 billion	7.16	$1.66 billion	$4.41	25.21
Block	$24.12 billion	1.66	$2.90 billion	$4.96	13.30

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

Volatility and Risk

Paychex has a beta of 0.91, indicating that its share price is 9% less volatile than the S&P 500. Comparatively, Block has a beta of 2.66, indicating that its share price is 166% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Paychex	26.45%	46.38%	12.24%
Block	12.99%	5.54%	3.24%

Summary

Block beats Paychex on 9 of the 15 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 Block

Square, Inc. provides payment and point-of-sale solutions in the United States and internationally. The company's commerce ecosystem includes point-of-sale software and hardware that enables sellers to turn mobile and computing devices into payment and point-of-sale solutions. It offers hardware products, including Magstripe reader, which enables swiped transactions of magnetic stripe cards; Contactless and chip reader that accepts EMV® chip cards and Near Field Communication payments; Chip card reader, which accepts EMV® chip cards and enables swiped transactions of magnetic stripe cards; Square Stand, which enables an iPad to be used as a payment terminal or full point of sale solution; and Square Register that combines its hardware, point-of-sale software, and payments technology, as well as managed payments solutions. The company also provides Square Point of Sale software; Cash App, which provides access to the financial system, allowing customers to electronically send, store, and spend money; Caviar, a food ordering platform for restaurants to offer food ordering, pickup and delivery, to their customers; and Square Capital that facilitates loans to sellers based on real-time payment and point-of-sale data. Square, Inc. was founded in 2009 and is headquartered in San Francisco, California.