Head-To-Head Analysis: Forrester Research (FORR) vs. Paychex (PAYX)

Forrester Research (NASDAQ: FORR) and Paychex (NASDAQ:PAYX) are both computer and technology companies, but which is the better stock? We will compare the two businesses based on the strength of their dividends, analyst recommendations, valuation, earnings, risk, institutional ownership and profitability.

Dividends

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Forrester Research pays an annual dividend of $0.80 per share and has a dividend yield of 1.8%. Paychex pays an annual dividend of $2.00 per share and has a dividend yield of 3.3%. Forrester Research pays out 96.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Paychex pays out 90.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Paychex has raised its dividend for 7 consecutive years. Paychex is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Forrester Research has a beta of 0.36, suggesting that its share price is 64% less volatile than the S&P 500. Comparatively, Paychex has a beta of 0.98, suggesting that its share price is 2% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Forrester Research and Paychex, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Forrester Research 0 0 0 0 N/A
Paychex 1 11 1 0 2.00

Paychex has a consensus target price of $64.94, indicating a potential upside of 6.12%. Given Paychex’s higher possible upside, analysts clearly believe Paychex is more favorable than Forrester Research.

Valuation and Earnings

This table compares Forrester Research 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
Forrester Research $337.67 million 2.39 $15.14 million $0.83 53.80
Paychex $3.15 billion 6.97 $817.30 million $2.20 27.78

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

Profitability

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

Net Margins Return on Equity Return on Assets
Forrester Research 4.48% 11.28% 4.65%
Paychex 27.22% 43.42% 11.86%

Institutional and Insider Ownership

59.8% of Forrester Research shares are owned by institutional investors. Comparatively, 68.7% of Paychex shares are owned by institutional investors. 43.5% of Forrester Research shares are owned by insiders. Comparatively, 11.7% of Paychex shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Summary

Paychex beats Forrester Research on 14 of the 16 factors compared between the two stocks.

Forrester Research Company Profile

Forrester Research, Inc. (Forrester) is an independent research, data, and advisory services firm. The Company offers research, data, advisory and related services that are thematic, prescriptive and executable, and that provide a perspective on the changing business environment. Its segments include Research, Product and Project Consulting. The Research segment is responsible for writing the research and performing the Webinars and inquiries for its Research and Connect products. The Product segment includes the product management organization that is responsible for product pricing and packaging and the launch of new products. In addition, this segment includes its Data, Connect and Events organizations. The Project Consulting segment offers project consulting services. Its products and services are categorized into Forrester Research, Forrester Connect, Forrester Data, Forrester Consulting and Forrester Events.

Paychex Company Profile

Paychex, Inc. provides payroll, human resource (HR), retirement, and insurance services for small to medium-sized businesses in the United States and Germany. The company offers payroll processing services that include payroll tax administration services; employee payment services; and regulatory compliance services, such as new-hire reporting and garnishment processing. It also provides HR outsourcing services, such as Paychex HR solutions comprising payroll, employer compliance, HR and employee benefits administration, risk management outsourcing, and the on-site availability of a professionally trained HR representative; and retirement services administration, including 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, the company offers insurance services for property and casualty coverage, such as workers' compensation, business-owner policies, commercial auto, and health and benefits coverage, including health, dental, vision, and life; cloud-based HR administration software products for employee benefits management and administration, time and attendance, and recruiting solutions; and other HR services and products, such as employee handbooks, management manuals, and personnel and required regulatory forms. Further, it provides various accounting and financial services to small to medium-sized businesses comprising payroll funding and outsourcing services, which include payroll processing, invoicing, and tax preparation; and various services, such as payment processing services, financial fitness programs, and a small-business loan resource center. Paychex, Inc. markets its products and services through direct sales force. The company was founded in 1979 and is headquartered in Rochester, New York.

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