Weaker-Than-Expected Management Solutions Growth Weighing On Shares Initially

Research evidence excerpt

Weaker-Than-Expected Management Solutions Growth Weighing On Shares Initially

TD Cowen Paychex

Global Research June 24, 2026

VALUATION METHODOLOGY AND RISKS

Valuation Methodology

Human Capital Management:

Our valuation methodology varies by company, depending on the composition of the business

(Software vs. Software & Services) and stage of growth. For Software businesses or for growth

companies that have recently entered the public equity markets, we primarily base our

valuation on Enterprise Value to Sales (EV/S), followed by Enterprise Value to Free Cash Flow

(EV/ FCF). For Software & Services companies or those in later-stage growth, we primarily base

our valuation on Price-to-Earnings (P/E), followed by Enterprise Value to Free Cash Flow (EV/

FCF) or Enterprise Value to EBITDA (EV/ EBITDA).

We make investment recommendations on certain early stage, pre-revenue companies based

upon an assessment of their business model, technology, probability of market success,

and the potential market opportunity, balanced by an assessment of applicable risks. Such

companies may not be assigned a price target.

Investment Risks

The global economy or specific end markets significantly worsen, contracting IT spending and

impairing software growth. The rate of SaaS/Cloud adoption slows, resulting in prolonged

sales cycles and higher-than-anticipated quarterly volatility. Competition increases materially,

driving deflationary pricing pressure and compressing margins. In particular, innovation by new

entrants in the software sector often produces solutions with similar or better functionality at

materially lower prices than incumbents’ legacy offerings. Future regulation initiatives could

have a negative impact on revenue growth prospects. Changing federal and government laws