Financial Analysis: Five9 (NASDAQ:FIVN) and Paychex (NASDAQ:PAYX)

Paychex (NASDAQ:PAYX) and Five9 (NASDAQ:FIVN) are both computer and technology companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, valuation, dividends, profitability, earnings, analyst recommendations and risk.

Insider & Institutional Ownership

83.5% of Paychex shares are owned by institutional investors. Comparatively, 96.6% of Five9 shares are owned by institutional investors. 0.8% of Paychex shares are owned by insiders. Comparatively, 1.6% of Five9 shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current recommendations for Paychex and Five9, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Paychex	4	13	1	0	1.83
Five9	1	6	12	0	2.58

Paychex presently has a consensus target price of $123.94, indicating a potential upside of 25.79%. Five9 has a consensus target price of $32.07, indicating a potential upside of 87.74%. Given Five9’s stronger consensus rating and higher probable upside, analysts plainly believe Five9 is more favorable than Paychex.

Profitability

This table compares Paychex and Five9’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%
Five9	2.77%	10.59%	3.87%

Volatility and Risk

Paychex has a beta of 0.9, indicating that its stock price is 10% less volatile than the S&P 500. Comparatively, Five9 has a beta of 1.32, indicating that its stock price is 32% more volatile than the S&P 500.

Earnings & Valuation

This table compares Paychex and Five9″s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Paychex	$5.57 billion	6.35	$1.66 billion	$4.41	22.34
Five9	$1.04 billion	1.28	-$12.80 million	$0.36	47.44

Paychex has higher revenue and earnings than Five9. Paychex is trading at a lower price-to-earnings ratio than Five9, indicating that it is currently the more affordable of the two stocks.

Summary

Paychex beats Five9 on 8 of the 14 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 Five9

Five9, Inc., together with its subsidiaries, provides intelligent cloud software for contact centers in the United States, India, and internationally. It offers a virtual contact center cloud platform that delivers a suite of applications, which enables the breadth of contact center-related customer service, sales, and marketing functions. The company’s platform comprises of including interactive virtual agent, agent assist, workflow automation, workforce engagement management, AI insights, and AI summaries that allows to manage and optimize customer interactions across voice, chat, email, web, social media, and mobile channels directly or through its application programming interfaces. It also matches each customer interaction with an agent resource and delivers customer data to the agent in real-time through integrations with adjacent enterprise applications, such as CRM software, to optimize the customer experience and enhance agent productivity. The company serves customers in various industries, such as banking and financial services, business process outsourcers, retail, healthcare, technology, and education. Five9, Inc. was incorporated in 2001 and is headquartered in San Ramon, California.