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Paycom (PAYC) Up 7.2% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Paycom Software (PAYC - Free Report) . Shares have added about 7.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Paycom due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Paycom’s Q3 Earnings & Revenues Surpass Estimates
Paycom Software delivered solid third-quarter 2022 performance, wherein both the top and bottom lines surpassed the respective Zacks Consensus Estimate and rose year over year.
The online payroll and human resource technology provider reported non-GAAP earnings of $1.27 per share, beating the Zacks Consensus Estimate of $1.18. The bottom line improved 38% from 92 cents per share reported in the year-ago quarter.
For the third quarter of 2022, Paycom reported revenues of $334 million, beating the consensus mark of $328.1 million and improving 30% year over year. This year-over-year upside was primarily driven by new client additions and continued focus on cross-selling to existing clients.
Quarter in Detail
Paycom’s recurring revenues (representing 98.2% of total revenues) improved 30.6% to $328.2 million in the third quarter.
Adjusted gross profits climbed 309.6% from the year-ago period to $280.5 million. However, the adjusted gross margin contracted 10 basis points (bps) on a year-on-year basis to 83.9%, primarily on the workforce returning to offices and aggressive hiring.
Paycom’s adjusted EBITDA increased 40.5% year over year to $126 million. Adjusted EBITDA margin expanded 270 bps to 37.7%.
Balance Sheet & Cash Flow
Paycom exited the third quarter with cash and cash equivalents of $317.2 million compared with $279 million recorded in the previous quarter.
The company’s balance sheet comprises net long-term debt of $29 million, which remained flat sequentially.
During third-quarter 2022, PAYC generated an operating cash flow of $67.6 million. During the first nine months of 2022, the company generated $236.6 million worth of operating cash flow.
Guidance
Paycom raised its guidance for full-year 2022. The company now predicts 2022 revenues to be between $1.371 billion and $1.373 billion compared with the earlier estimate of $1.354-$1.356 billion.
Adjusted EBITDA is now projected to be in the $560-$562 million range compared with the prior guided range of $546-$548 million.
For the fourth quarter of 2022, Paycom estimates revenues between $366 million and $368 million. Management projects adjusted EBITDA of $144-$146 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Paycom has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Paycom has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Paycom belongs to the Zacks Internet - Software industry. Another stock from the same industry, F5 Networks (FFIV - Free Report) , has gained 10.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
F5 reported revenues of $700.03 million in the last reported quarter, representing a year-over-year change of +2.6%. EPS of $2.62 for the same period compares with $3.01 a year ago.
F5 is expected to post earnings of $2.37 per share for the current quarter, representing a year-over-year change of -18%. Over the last 30 days, the Zacks Consensus Estimate has changed -2%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for F5. Also, the stock has a VGM Score of B.
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Paycom (PAYC) Up 7.2% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Paycom Software (PAYC - Free Report) . Shares have added about 7.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Paycom due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Paycom’s Q3 Earnings & Revenues Surpass Estimates
Paycom Software delivered solid third-quarter 2022 performance, wherein both the top and bottom lines surpassed the respective Zacks Consensus Estimate and rose year over year.
The online payroll and human resource technology provider reported non-GAAP earnings of $1.27 per share, beating the Zacks Consensus Estimate of $1.18. The bottom line improved 38% from 92 cents per share reported in the year-ago quarter.
For the third quarter of 2022, Paycom reported revenues of $334 million, beating the consensus mark of $328.1 million and improving 30% year over year. This year-over-year upside was primarily driven by new client additions and continued focus on cross-selling to existing clients.
Quarter in Detail
Paycom’s recurring revenues (representing 98.2% of total revenues) improved 30.6% to $328.2 million in the third quarter.
Adjusted gross profits climbed 309.6% from the year-ago period to $280.5 million. However, the adjusted gross margin contracted 10 basis points (bps) on a year-on-year basis to 83.9%, primarily on the workforce returning to offices and aggressive hiring.
Paycom’s adjusted EBITDA increased 40.5% year over year to $126 million. Adjusted EBITDA margin expanded 270 bps to 37.7%.
Balance Sheet & Cash Flow
Paycom exited the third quarter with cash and cash equivalents of $317.2 million compared with $279 million recorded in the previous quarter.
The company’s balance sheet comprises net long-term debt of $29 million, which remained flat sequentially.
During third-quarter 2022, PAYC generated an operating cash flow of $67.6 million. During the first nine months of 2022, the company generated $236.6 million worth of operating cash flow.
Guidance
Paycom raised its guidance for full-year 2022. The company now predicts 2022 revenues to be between $1.371 billion and $1.373 billion compared with the earlier estimate of $1.354-$1.356 billion.
Adjusted EBITDA is now projected to be in the $560-$562 million range compared with the prior guided range of $546-$548 million.
For the fourth quarter of 2022, Paycom estimates revenues between $366 million and $368 million. Management projects adjusted EBITDA of $144-$146 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Paycom has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Paycom has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Paycom belongs to the Zacks Internet - Software industry. Another stock from the same industry, F5 Networks (FFIV - Free Report) , has gained 10.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
F5 reported revenues of $700.03 million in the last reported quarter, representing a year-over-year change of +2.6%. EPS of $2.62 for the same period compares with $3.01 a year ago.
F5 is expected to post earnings of $2.37 per share for the current quarter, representing a year-over-year change of -18%. Over the last 30 days, the Zacks Consensus Estimate has changed -2%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for F5. Also, the stock has a VGM Score of B.