Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Paychex, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 16.6% to 8.3% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 109, DPO 26, DIO 60). At a 8.3% WACC with mid-year discounting, the terminal value (87% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 22.6x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $166.63 per share, suggesting PAYX is undervalued by 78.7% at the current price of $93.25.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 2,499 | 2,639 | 2,783 | 3,013 | 3,261 | 3,343 |
| (−) Net Interest | 65 | 69 | 72 | 78 | 85 | 87 |
| (+) D&A | 149 | 165 | 180 | 195 | 210 | 215 |
| EBITDA | 2,713 | 2,873 | 3,035 | 3,286 | 3,556 | 3,645 |
| (−) Tax | 593 | 627 | 661 | 715 | 774 | — |
| (−) CapEx | 196 | 207 | 218 | 236 | 255 | — |
| (−) ΔWC | 271 | 119 | 122 | 195 | 211 | — |
| Free Cash Flow (FCF) | 1,653 | 1,921 | 2,035 | 2,140 | 2,316 | — |
| Peers' EBITDA Multiple | 22.6x | |||||
| Terminal Value | 82,556 | |||||
| WACC / Discount Rate | 8.26% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 1,588 | 1,705 | 1,669 | 1,621 | 1,620 | 55,519 |
| Enterprise Value | 63,723 | |||||
| Projection Period | 8,203 | 12.9% | ||||
| Terminal Value | 55,519 | 87.1% | ||||
| (−) Current Net Debt | 3,394 | |||||
| Equity Value | 60,329 | |||||
| (÷) Outstanding Shares | 362M | |||||
| Fair Price | $167 | +78.7% | ||||
| WACC \ EV/EBITDA Exit Multiple | 18.6x | 20.6x | 22.6x | 24.6x | 26.6x |
|---|---|---|---|---|---|
| 6.3% | $153 | $168 | $183 | $198 | $212 |
| 7.3% | $146 | $160 | $174 | $189 | $203 |
| 8.3% | $140 | $153 | $167 | $180 | $194 |
| 9.3% | $133 | $146 | $159 | $172 | $185 |
| 10.3% | $128 | $140 | $152 | $165 | $177 |
Current price: $93.25. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.