On Thursday, JMP Securities announced a downgrade of Paycor HCM Inc (NASDAQ: NASDAQ:PYCR) stock rating from 'Market Outperform' to 'Market Perform'. The revision follows Paycor's definitive agreement to be acquired by Paychex, Inc. (PAYX, NC) at a purchase price of $22.50 per share. This valuation is slightly below Paycor's 2021 Initial Public Offering (IPO) price of $23.00 and puts the enterprise value of the deal at approximately $4.1 billion.
According to InvestingPro data, Paycor currently maintains impressive gross profit margins of 66% and has shown strong revenue growth of 17.5% over the last twelve months.
The acquisition price represents a multiple of 5.3 times Paycor's projected enterprise value to revenue for the calendar year 2025. Over the past year, Paycor's stock has seen an increase of 9%, with a more significant rise of 19% since the beginning of the year. These figures contrast with the performance of broader market indices, with the S&P 500 and the Russell 3000 growing 24% and 23% over the last 12 months, and 2% and 1% year to date, respectively.
JMP Securities provided a statement regarding the downgrade, citing the acquisition terms as a key factor. The analyst noted, "We are downgrading Paycor HCM, Inc. to Market Perform from Market Outperform after it entered into a definitive agreement to be acquired by Paychex for $22.50 per share, just $0.50 shy of its 2021 IPO price of $23.00."
The acquisition is a strategic move by Paychex, a leading provider of integrated human capital management solutions for payroll, benefits, human resources, and insurance services. Paycor, a software company that offers similar human resources and payroll solutions, will bolster Paychex's portfolio with its suite of products designed for small to medium-sized businesses.
The financial details of the acquisition reveal that Paychex values Paycor at an enterprise value of $4.1 billion, which is equivalent to 5.3 times the projected revenue for Paycor in the calendar year 2025. The deal has influenced the market's perception of Paycor's stock, leading to the adjustment in its rating by JMP Securities.
In other recent news, Paycor HCM Inc. is set to be acquired by Paychex Inc (NASDAQ:PAYX). in an all-cash transaction valued at approximately $4.1 billion. The acquisition price aligns with Mizuho (NYSE:MFG) Securities' updated price target of $22.50 per share, up from the previous $20.00. Despite the acquisition, Needham maintained its Buy rating for Paycor, reflecting confidence in the company's standalone value. However, BMO Capital Markets and Stifel analysts have downgraded Paycor's stock, aligning their price targets with the acquisition offer.
On the financial front, Paycor reported a 17% increase in total revenue, reaching $167 million, and a 16% increase in recurring revenue at the start of fiscal year 2025. The company also ended the first quarter with a strong cash position of $98 million, free of debt. These are recent developments and investors are advised to keep a close eye on Paycor's progress in the coming quarters.
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