Barrett Business Services (NASDAQ: BBSI) and Paychex (NASDAQ:PAYX) are both business services companies, but which is the better business? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, risk, valuation, profitability and institutional ownership.

Dividends

Barrett Business Services pays an annual dividend of $1.00 per share and has a dividend yield of 1.9%. Paychex pays an annual dividend of $2.00 per share and has a dividend yield of 3.6%. Barrett Business Services pays out 42.0% of its earnings in the form of a dividend. Barrett Business Services has raised its dividend for 6 consecutive years.

Profitability

This table compares Barrett Business Services and Paychex’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Barrett Business Services 2.06% 33.55% 3.62%
Paychex 25.93% 42.65% 12.55%

Insider and Institutional Ownership

72.0% of Barrett Business Services shares are held by institutional investors. Comparatively, 68.7% of Paychex shares are held by institutional investors. 6.0% of Barrett Business Services shares are held by company insiders. Comparatively, 11.6% of Paychex shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Volatility and Risk

Barrett Business Services has a beta of 1.34, meaning that its share price is 34% more volatile than the S&P 500. Comparatively, Paychex has a beta of 0.96, meaning that its share price is 4% less volatile than the S&P 500.

Earnings & Valuation

This table compares Barrett Business Services and Paychex’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Barrett Business Services $881.77 million 0.44 $29.94 million $2.38 22.15
Paychex $3.15 billion 6.42 $1.37 billion N/A N/A

Paychex has higher revenue and earnings than Barrett Business Services.

Analyst Ratings

This is a summary of current ratings and recommmendations for Barrett Business Services and Paychex, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Barrett Business Services 0 0 0 0 N/A
Paychex 3 11 1 0 1.87

Paychex has a consensus price target of $59.16, indicating a potential upside of 5.19%. Given Paychex’s higher possible upside, analysts plainly believe Paychex is more favorable than Barrett Business Services.

Summary

Paychex beats Barrett Business Services on 12 of the 15 factors compared between the two stocks.

About Barrett Business Services

Barrett Business Services, Inc. (BBSI) is a provider of business management solutions for small and mid-sized companies. The Company has developed a management platform that integrates a knowledge-based approach from the management consulting industry with tools from the human resource outsourcing industry. BBSI’s purpose is to advocate for business owners, particularly in the small and mid-sized business segment. The Company offers two categories of services: Professional Employer Services (PEO) and Staffing. Its staffing services include on-demand or short-term staffing assignments, contract staffing, direct placement, and long-term or indefinite-term on-site management. As of December 31, 2016, the Company operated in 20 states and the District of Columbia through a network of 57 branch locations in California, Oregon, Utah, Washington, Idaho, Arizona, Colorado, Maryland, North Carolina, Delaware, Nevada, Pennsylvania and Virginia.

About Paychex

Paychex, Inc. is a provider of integrated human capital management (HCM) solutions for payroll, human resource (HR), retirement and insurance services for small- to medium-sized businesses in the United States. The Company also has operations in Germany. The Company offers services, including Payroll processing, Human Resource Services, and Accounting and Financial Services. As of May 31, 2016, the Company serviced approximately 605,000 payroll clients. It offers a portfolio of HCM services and products that allows its clients to meet their payroll and HR needs. Its payroll-related ancillary services and human resource service (HRS) offerings often leverage the information gathered in the base payroll processing service, allowing it to provide outsourcing services covering the HCM spectrum. The Company, through its HCM software-as-a-service platform, Paychex Flex, provides an integrated product suite that covers the employee life cycle from recruiting and hiring to retirement.

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