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Bull of the Day: Paylocity (PCTY)

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It’s no secret that the job market has been pretty good over the last several months. It’s also no secret that cloud-based stocks have done very well this earnings season. So for today’s Bull of the Day I’ve decided to talk about a stock that’s standing right there at the intersection of jobs and the cloud. How about a cloud-based payroll company? That’s exactly what we have here in Paylocity (PCTY - Free Report) .

Paylocity Holding Corporation provides cloud-based payroll and human capital management software solutions for medium-sized organizations in the United States. The company is coming off a solid quarter where revenue growth was 50%. EPS came in at a 10 cent loss versus expectations for a 12 cent loss. That’s coming off last quarter’s 7 cent beat.

The Zacks Rank #1 (Strong Buy) rating is due to two analysts increasing their earnings estimates for the current quarter and the current year. The bullish sentiment has pushed up our Zacks Consensus Estimate from a 1 cent loss to 2 cents of profits for the current year. Next year’s numbers call for 18 cents EPS. It’s part of an internet software industry that we rank in the Top 24% of our Zacks Industry Rank.

Looking at the stock chart, shares of Paylocity have sold off a bit since failing to get to $50 earlier this month. The retreat from the highs pushed down the commodity channel index to -184 before a two day rally saw it rebound to -110. If the rebound continues, it would likely push the CCI back above the zero line and give a “Buy” signal for the indicator. The stock has already broken down through the 23.6% retracement of the February to August move and sits below the 21-day moving average near 45. If the buying can continue in the short term for Paylocity, technical traders would likely come in and support a rally above the moving average and help shares of PCTY re-establish their long term bullish trend.

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