A month has gone by since the last earnings report for Paycom Software (PAYC - Free Report) . Shares have added about 2.3% in that time frame, outperforming 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 catalysts.
Paycom Software Q1 Results Surpass Estimates
Paycom Software’s first-quarter 2019 non-GAAP earnings per share came in at $1.19 per share, which surpassed the Zacks Consensus Estimate of $1.12 and also grew 24% year over year.
The company generated revenues of $199.9 million, surging 30% from the year-earlier period and also outpaced the Zacks Consensus Estimate of $196 million, driven by new business wins.
The company’s strong software offering, focused sales efforts and its concentrated employee usage strategy are driving growth. Robust adoption of enhanced Human Capital Management (HCM) software solutions is a key catalyst.
Moreover, the company’s top line received a 30% year-over-year positive impact in recurring revenues, comprising around 98% of total revenues.
Adjusted gross profit jumped 30.3% from the year-ago period to $173.5 million. The company’s adjusted gross margin expanded 30 basis points (bps) on a year-over-year basis to 86.8%.
Paycom Software’s adjusted EBITDA rose 28% year over year to $103.3 million.
Balance Sheet & Cash Flow
Paycom Software exited the first quarter with cash and cash equivalents of $91.3 million compared with $45.7 million in the sequential quarter.
The company’s balance sheet comprises long-term debt of $33.95 million compared with $34.4 million sequentially.
Net cash provided by operating activities in the reported quarter was $47.3 million compared with $39 million in the fourth quarter of 2018.
Since the initiation of its repurchase program in 2019, Paycom has bought back more than 3.5 million shares at average price of $79.56.
For second-quarter 2019, Paycom Software expects revenues in the range of $162.5-$164.5 million.
Adjusted EBITDA is estimated in the band of $62.5-$64.5 million.
Paycom Software raised forecasts for the full year. The company envisions revenues within $718-$720 million, up from $710-$712 million predicted earlier.
Adjusted EBITDA is anticipated in the bracket of $296-$298 million, up from the earlier guided range of $288-$290 million.
The company projects adjusted gross margin within 83-85%.
Management is also optimistic about strong client additions within the upper end of the company’s market, which would be up to 5,000. The launch of new Direct Data Exchange for all Paycom clients in the quarter is also likely to boost client wins.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
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.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Paycom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.