/Paycom%20Software%20Inc%20logo%20on%20laptop-by%20monticello%20via%20Shutterstock.jpg)
Oklahoma City, Oklahoma-based Paycom Software, Inc. (PAYC) provides cloud-based human capital management (HCM) solutions delivered as software-as-a-service for small to mid-sized companies. Valued at a market cap of $11.9 billion, the company offers functionality and data analytics that businesses need to manage their employment life cycle from recruitment to retirement.
Companies worth $10 billion or more are generally described as “large-cap” stocks, and Paycom fits right into that category, with its market cap exceeding this threshold. The software company distinguishes itself as one of the first companies to offer a fully online payroll service. Its application removes HR professionals from the administrative work of data entry, freeing them to focus on strategy that drives business forward.
PAYC is currently trading 14.8% below its 52-week high of $242.74, reached recently on Dec. 11. Shares of this HCM service provider have rallied 23.2% over the past three months, significantly outperforming the broader Nasdaq Composite’s ($NASX) 8.8% gain during the same time frame.
Moreover, over the past six months, shares of PAYC are up 45.8%, massively surpassing NASX’s 10.4% gains. However, PAYC has increased marginally over the past 52 weeks, significantly underperforming NASX’s 30.6% returns over the same time frame.
While PAYC has been trading below its 50-day moving average since mid-December, it has remained above its 200-day moving average since late October.
Shares of PAYC skyrocketed almost 21.4% after delivering better-than-expected Q3 revenues of $451.9 million on Oct. 30, which grew roughly 11.2% annually, and earnings of $1.67 per share, which declined 5.2% from the year-ago quarter. The top line benefited from increased sales momentum, international expansion, and artificial intelligence (AI) integration in its products. However, a significant contraction in its adjusted EBITDA and gross margins led to a decline in its bottom line.
Paycom’s Q4 sales outlook of $477 million to $484 million came in significantly ahead of the average analyst estimates. This might have further bolstered investor confidence. Additionally, PAYC expects Q4 adjusted EBITDA between $184.5 million and $191.5 million. For the full-year period, management raised its adjusted EBITDA guidance to $745-$752 million and expects revenues in the band of $1.866-$1.873 billion, reflecting a strong recovery trajectory.
PAYC has outperformed its rival, Workday, Inc. (WDAY), which declined 2.7% over the past 52 weeks and gained 19.2% over the past six months.
Despite Paycom’s recent outperformance, analysts remain cautious about its prospects. The stock has a consensus rating of “Hold” from the 18 analysts covering it, and the mean price target of $220.92 suggests a modest 6.9% premium to its current levels.
