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Buy These 3 HCM Software Solution Stocks to Tap Short-Term Potential
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Key Takeaways
PAYC is expanding payroll and HR automation while adding clients and growing cross-selling.
PCTY is enhancing its AI-powered HCM platform with broader AI Assistant capabilities.
FA provides HR software, screening and identity solutions and boasts improving earnings estimates.
The human capital management (HCM) software solution industry itself is undergoing a structural transformation, driven by digital innovation, evolving workforce demographics and the rising adoption of flexible work models.
Technology is central to this shift. AI-driven recruitment platforms, virtual assessments and advanced analytics are improving placement speed, reducing hiring costs and enhancing match quality, factors that can significantly expand margins and improve ROI (return on investment).
Here, we recommend three HCM software solutions providers with a favorable Zacks Rank for investment. These stocks have strong short-term price upside potential. The companies are: Paycom Software Inc. (PAYC - Free Report) , Paylocity Holding Corp. (PCTY - Free Report) and First Advantage Corp. (FA - Free Report) . Each of our picks currently carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our three picks in the past month.
Image Source: Zacks Investment Research
Paycom Software Inc.
Zacks Rank #1 Paycom Software is benefiting from an employee-first, single-database HCM platform that pushes automation deeper into payroll and HR workflows. PAYC’s tools, such as Beti, GONE and IWant, help clients reduce manual work and raise engagement, supporting retention and a long runway as automation adoption expands.
New client additions and a continued focus on cross-selling to existing clients are aiding revenue growth and helping PAYC win new customers. PAYC is also returning substantial capital through buybacks and dividends, which can lift per-share value creation.
Paycom Software has an expected revenue and earnings growth rate of 6.7% and 15.4%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 0.1% over the past 30 days.
The short-term average price target of brokerage firms represents an increase of 22.1% from the last closing price of $124.48. The brokerage target price is currently in the range of $120-$195. This indicates a maximum upside of 56.7% and a maximum downside of 3.6%. The risk/reward ratio is 1:15.8.
Paylocity Holding Corp.
Zacks Rank #1 Paylocity Holding benefits from a strong, AI-enabled human capital management platform that improves automation, decision-making and overall user experience, making the solution deeply embedded for mid-market customers.
PCTY’s multi-pronged AI strategy encompasses personalized recommendations, sentiment analysis, predictive workforce insights, and optimized scheduling alongside generative capabilities. PCTY’s AI Assistant is currently available to all clients as part of core HR and Payroll offerings, with expanded functionality rolling out.
Paylocity Holding has an expected revenue and earnings growth rate of 7.5% and 6.5%, respectively, for the next year (ending June 2027). The Zacks Consensus Estimate for next year’s earnings has improved 1.5% over the past 30 days.
The short-term average price target of brokerage firms represents an increase of 54.5% from the last closing price of $100.48. The brokerage target price is currently in the range of $112-$250. This indicates a maximum upside of 148.8% and no downside. The risk/reward ratio is extremely favorable.
First Advantage Corp.
Zacks Rank #2 First Advantage is a provider of software and data in the human resource technology industry. FA’s platforms offer data and APIs to power comprehensive employment background screening, digital identity solutions and verification services.
First Advantage has an expected revenue and earnings growth rate of 6.4% and 18.3%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 1.7% over the last 60 days.
The short-term average price target of brokerage firms represents an increase of 8.2% from the last closing price of $16.76. The brokerage target price is currently in the range of $17-$20. This indicates a maximum upside of 19.3% and no downside. The risk/reward ratio is extremely favorable.
View the Zacks #1 Rank List
Image: Bigstock
Buy These 3 HCM Software Solution Stocks to Tap Short-Term Potential
Key Takeaways
The human capital management (HCM) software solution industry itself is undergoing a structural transformation, driven by digital innovation, evolving workforce demographics and the rising adoption of flexible work models.
Technology is central to this shift. AI-driven recruitment platforms, virtual assessments and advanced analytics are improving placement speed, reducing hiring costs and enhancing match quality, factors that can significantly expand margins and improve ROI (return on investment).
Here, we recommend three HCM software solutions providers with a favorable Zacks Rank for investment. These stocks have strong short-term price upside potential. The companies are: Paycom Software Inc. (PAYC - Free Report) , Paylocity Holding Corp. (PCTY - Free Report) and First Advantage Corp. (FA - Free Report) . Each of our picks currently carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our three picks in the past month.
Image Source: Zacks Investment Research
Paycom Software Inc.
Zacks Rank #1 Paycom Software is benefiting from an employee-first, single-database HCM platform that pushes automation deeper into payroll and HR workflows. PAYC’s tools, such as Beti, GONE and IWant, help clients reduce manual work and raise engagement, supporting retention and a long runway as automation adoption expands.
New client additions and a continued focus on cross-selling to existing clients are aiding revenue growth and helping PAYC win new customers. PAYC is also returning substantial capital through buybacks and dividends, which can lift per-share value creation.
Paycom Software has an expected revenue and earnings growth rate of 6.7% and 15.4%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 0.1% over the past 30 days.
The short-term average price target of brokerage firms represents an increase of 22.1% from the last closing price of $124.48. The brokerage target price is currently in the range of $120-$195. This indicates a maximum upside of 56.7% and a maximum downside of 3.6%. The risk/reward ratio is 1:15.8.
Paylocity Holding Corp.
Zacks Rank #1 Paylocity Holding benefits from a strong, AI-enabled human capital management platform that improves automation, decision-making and overall user experience, making the solution deeply embedded for mid-market customers.
PCTY’s multi-pronged AI strategy encompasses personalized recommendations, sentiment analysis, predictive workforce insights, and optimized scheduling alongside generative capabilities. PCTY’s AI Assistant is currently available to all clients as part of core HR and Payroll offerings, with expanded functionality rolling out.
Paylocity Holding has an expected revenue and earnings growth rate of 7.5% and 6.5%, respectively, for the next year (ending June 2027). The Zacks Consensus Estimate for next year’s earnings has improved 1.5% over the past 30 days.
The short-term average price target of brokerage firms represents an increase of 54.5% from the last closing price of $100.48. The brokerage target price is currently in the range of $112-$250. This indicates a maximum upside of 148.8% and no downside. The risk/reward ratio is extremely favorable.
First Advantage Corp.
Zacks Rank #2 First Advantage is a provider of software and data in the human resource technology industry. FA’s platforms offer data and APIs to power comprehensive employment background screening, digital identity solutions and verification services.
First Advantage has an expected revenue and earnings growth rate of 6.4% and 18.3%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 1.7% over the last 60 days.
The short-term average price target of brokerage firms represents an increase of 8.2% from the last closing price of $16.76. The brokerage target price is currently in the range of $17-$20. This indicates a maximum upside of 19.3% and no downside. The risk/reward ratio is extremely favorable.