Paycom Software Sees Strong Performance Despite Analyst Caution
Oklahoma City-based Paycom Software, Inc. (PAYC) stands out in the cloud-based human capital management (HCM) space, targeting small to mid-sized businesses. With a market cap of $11.9 billion, the company offers essential tools for managing the entire employment cycle, from hiring to retirement.
How Paycom Fits In the Big Picture
With a market cap exceeding $10 billion, Paycom falls into the “large-cap” stock category. It is known for being one of the pioneers in offering a fully online payroll service, which streamlines processes for HR professionals. This allows them to step away from mundane data entry tasks and focus on strategies that advance business goals.
Current Stock Performance and Trends
At present, PAYC trades 14.8% below its 52-week high of $242.74, achieved on December 11. Its shares have surged by 23.2% over the last three months, outperforming the broader Nasdaq Composite ($NASX), which gained 8.8% during the same period.
Long-Term Gains and Moving Averages
Over the past six months, Paycom’s shares have risen by 45.8%, significantly outpacing the NASX’s 10.4% increase. Despite this, PAYC’s growth over the past 52 weeks has been marginal at best, underperforming the NASX’s impressive 30.6% returns.
While the stock has been below its 50-day moving average since mid-December, it has consistently stayed above its 200-day moving average since late October.
Q3 Earnings Beat Expectations
Shares of PAYC jumped nearly 21.4% after reporting Q3 revenues of $451.9 million on October 30, marking an 11.2% annual growth. Earnings per share came in at $1.67, down 5.2% from the previous year. The revenue increase was driven by rising sales, international market growth, and the integration of artificial intelligence (AI) into its services. However, adjusted EBITDA and gross margins saw a significant contraction, affecting overall earnings.
Positive Outlook for Q4
Paycom’s Q4 sales forecast of $477 million to $484 million significantly surpasses average analyst predictions, enhancing investor confidence. The company projected Q4 adjusted EBITDA between $184.5 million and $191.5 million, while raising its full-year adjusted EBITDA guidance to between $745 million and $752 million and revenue expectations to between $1.866 billion and $1.873 billion, indicating a solid path to recovery.
Comparing Competitors
In the competitive landscape, PAYC has outperformed rival Workday, Inc. (WDAY), which has seen a 2.7% decline over the past year, despite a 19.2% gain over the last six months.
Analysts’ Perspectives
Despite its recent success, analysts are taking a cautious view on Paycom’s future. The stock holds a consensus rating of “Hold” from the 18 analysts monitoring it, with a mean price target of $220.92, suggesting only a modest 6.9% upside from current levels.
On the date of publication, Neharika Jain did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
