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Here's Why It Is Wise to Hold On to Paycom (PAYC) Stock Now

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Paycom Software, Inc. (PAYC - Free Report) 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 28.6%.

With expected long-term earnings per share growth rate of 24.4% and a market cap of $6.33 billion, it seems to be a stock that investors need to retain in their portfolio if they are looking to reap long-term gains.

Notably, the Paycom stock has gained 25% in the year so far, outperforming the industry’s rally of 18.7%.

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

Paycom is a provider of cloud-based human capital management (HCM) software as a service solution for integrated software for employee records and talent management processes. The company offers analytics which manage the complete employment life cycle, right from recruitment to retirement.

The company is gaining from its regular investments in SaaS technology. Over the last few years, clients migrating from traditional payroll service providers to the company’s SaaS-based services have contributed significantly to its revenues. Notably, more and more organizations are becoming aware of the benefits of new age human resource technologies, which will continue to positively impact their financials.

We believe accelerated adoption of Paycom’s robust portfolio has aided the company’s financials. In first-quarter 2018, the company’s revenues came in at $153.9 million, reflecting a 29% year-over-year increase, and beat the Zacks Consensus Estimate of $151 million.

Furthermore, the company’s client base has been growing, supported by its sales force. In the last reported quarter, management was particularly optimistic about the operations of the company’s sales force, with senior sales people outperforming expectations. Pertaining to the stellar performance of the sales team, the company opened its 47th sales office in Rochester, NY, in the first quarter of 2018.

Nevertheless, heightening competition from companies like Paylocity Holding Corporation (PCTY - Free Report) , Intuit Inc. (INTU - Free Report) and Paychex, Inc. (PAYX - Free Report) remains a headwind, which could lead to pricing pressure and affect Paycom’s margins.

Paycom 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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