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Here's Why You Should Hold On to Paylocity (PCTY) Stock

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Paylocity Holding PCTY has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average positive surprise of 220.1%.

With expected long-term earnings per share growth rate of 22% and a market cap of $3.03 billion, it seems to be a stock that investors need to retain in their portfolio if they are looking to reap long-term gains.

Let’s take a look at the factors aiding the company’s performance.

Paylocity, a provider of cloud-based payroll and human capital management (HCM) software solutions, is gaining from its regular investments in SaaS technology.

Over the last few quarters, clients moving from traditional payroll service providers to the company’s SaaS-based services contributed significantly to its revenues. Hence, regular investments in technological upgrades, along with product innovation, will continue to boost the company’s top line.

Notably, Paylocity stock has gained 30.2% in the last year, outperforming the industry’s rally of 27.7%.

We believe that accelerated adoption of the company’s robust portfolio has aided the company’s financials. In third-quarter fiscal 2018, the company’s revenues came in at $113.4 million, reflecting an increase of 25.6% year over year and beating the Zacks Consensus Estimate of $111 million.

Apart from the organic enrichment of the portfolio, management is extremely optimistic about the acquisition of BeneFLEX. This new buyout has added a host of benefit administration related solutions and is expected to drive its revenues further.

However, competition in the payroll processing sector from existing players like Automatic Data Processing, Inc. ADP, Paychex, Inc., PAYX and Oracle Corporation (ORCL - Free Report) among others remains a major headwind. Increasing competition from new entrants also remains a threat. These are expected to generate pricing pressure and affect Paylocity’s margins going ahead.

Zacks Rank

Paylocity has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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