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Why Is Paycom (PAYC) Down 4.8% Since Last Earnings Report?

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A month has gone by since the last earnings report for Paycom Software (PAYC - Free Report) . Shares have lost about 4.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Paycom due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Paycom’s Q1 Earnings & Revenues Surpass Estimates

Paycom reported first-quarter 2021 results on Tuesday. This online payroll and human resource technology provider’s adjusted earnings of $1.47 per share beat the Zacks Consensus Estimate by 3.52% and rose 10.5% year over year.

Revenues

The company generated revenues of $272.2 million, which increased 12.3% from the year-earlier period and surpassed the consensus mark of $271 million. This year-over-year increase was mainly driven by new client additions, which offset the negative impact of lower forms, filings and adjustments due to reduced hiring in COVID-impacted industries.

In its earnings conference call, Paycom noted that the 150-bp interest-rate cut in March 2020 that led to an additional weekly recurring revenue loss of $350,000 remained unchanged during the first quarter.

Margins

Adjusted gross profit increased 11% from the year-ago period to $236.9 million. However, adjusted gross margin contracted 110 bps on a year-on-year basis to 87%.

Paycom Software’s adjusted EBITDA increased 12.8% year on year to $133 million. Further, adjusted EBITDA margin advanced 20 bps to 48.9%.

Balance Sheet & Cash Flow

Paycom Software exited the quarter with cash and cash equivalents of $215.1 million compared with the $151.7 million recorded in the prior quarter.

The company’s balance sheet comprises net long-term debt of $30.5 million compared with the previous quarter’s $30.9 million.

Cash from operations was $89.5 million in the quarter.

Guidance

For the second quarter, Paycom Software estimates revenues between $231 million and $233 million.

Management projects adjusted EBITDA of $80-$82 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

Currently, Paycom has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Paycom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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