Financial Review: Paychex (NASDAQ:PAYX) vs. HireQuest (NASDAQ:HQI)

HireQuest (NASDAQ:HQI) and Paychex (NASDAQ:PAYX) are both industrials companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, valuation, dividends, profitability, analyst recommendations, institutional ownership and risk.

Analyst Ratings

This is a breakdown of current ratings for HireQuest and Paychex, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
HireQuest	0	1	2	0	2.67
Paychex	2	13	2	1	2.11

HireQuest presently has a consensus price target of $19.00, suggesting a potential upside of 0.90%. Paychex has a consensus price target of $127.59, suggesting a potential upside of 26.30%. Given Paychex’s higher probable upside, analysts clearly believe Paychex is more favorable than HireQuest.

Earnings & Valuation

This table compares HireQuest 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
HireQuest	$30.64 million	8.54	$6.33 million	$0.57	33.04
Paychex	$6.51 billion	5.52	$1.76 billion	$5.04	20.04

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

Institutional & Insider Ownership

12.0% of HireQuest shares are held by institutional investors. Comparatively, 83.5% of Paychex shares are held by institutional investors. 42.9% of HireQuest shares are held by insiders. Comparatively, 0.6% of Paychex shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

HireQuest pays an annual dividend of $0.24 per share and has a dividend yield of 1.3%. Paychex pays an annual dividend of $4.76 per share and has a dividend yield of 4.7%. HireQuest pays out 42.1% of its earnings in the form of a dividend. Paychex pays out 94.4% 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 has raised its dividend for 3 consecutive years. Paychex is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

HireQuest has a beta of 1.16, indicating that its share price is 16% more volatile than the S&P 500. Comparatively, Paychex has a beta of 0.86, indicating that its share price is 14% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
HireQuest	27.06%	16.35%	12.11%
Paychex	27.35%	52.78%	12.29%

Summary

Paychex beats HireQuest on 11 of the 17 factors compared between the two stocks.

About HireQuest

HireQuest, Inc. provides temporary staffing services in the United States. It offers staffing services, including direct-dispatch, executive search, consultant, unskilled and semi-skilled industrial and construction personnel, clerical and administrative personnel, and permanent placement services, as well as commercial and non-CDL drivers, and skilled personnel in the medical and dental industries. The company provides its services under the HireQuest Direct, HireQuest, SNelling, DriverQuest, HireQuest Health, Northbound Executive Search, and MRI trade names. It serves construction, recycling, warehousing, logistics, auctioneering, manufacturing, hospitality, landscaping, and retail industries, as well as dental practices. HireQuest, Inc. was founded in 2002 and is headquartered in Goose Creek, South Carolina.

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.