Stock Analysis & Ideas

Paylocity is Poised for Growth, Say Analysts

Illinois-based Paylocity Holding Corp. (NASDAQ: PCTY) provides cloud-based HR and payroll software solutions that help businesses deal with day-to-day challenges. It uses its cloud-based platform to provide services in a Software-as-a-Service (SaaS) model.

The company’s offerings include human capital management (HCM), payroll, time labor tracking, benefits administration, workforce management, and talent management solutions, among others.

Last month, Paylocity reported better-than-expected financial results for the fiscal second quarter ended December 31, 2021, and issued guidance for the third quarter and Fiscal Year 2022.

Total revenue increased 34% year-over-year to $196 million, beating the Street’s estimate of around $188 million. Adjusted EPS came in at $0.64, higher than the year-ago figure of $0.39 and the consensus estimate of $0.40.

The company expects revenues in the range of $239 million to $243 million in the third quarter and between $829 million and $834 million in Fiscal 2022. The consensus estimate for the quarter stands within the guidance range at $240.13 million, while for the Fiscal Year 2022, the Street expects revenue to come in below the guidance range at $818.59 million.

Several analysts have offered their views on the company’s results. Let us understand what do they have to say.

Arvind Ramnani of Piper Sandler (NYSE: PIPR) said, “Consistent beat and raises drive conviction in Paylocity’s business momentum.”

He expects the company to surpass his revenue growth and adjusted EBITDA margin estimates for Fiscal 2022 due to sustained momentum and a shift to SaaS HCM solutions.

Robert W. Baird analyst Mark Marcon raised his estimates following the release of the second-quarter results. Marcon said that he is “even more positive on the fundamental outlook” of the company.

Further, Brian Peterson from Raymond James (NYSE: RJF) likes the risk/reward profile of Paylocity, which has “consistently delivered 20% growth and 20% EBITDA margins.”

Meanwhile, Truist Financial analyst Terry Tillman raised his Fiscal 2022 EPS estimate to $2.66 from $2.55, as the company “continues to capitalize on improving demand across all industries.”

Management Changes

Recently, Paylocity promoted CFO Toby Williams to President and Co-CEO. Williams, who joined the company in 2017, will also join the company’s Board.

Additionally, Ryan Glenn has been promoted to CFO with immediate effect. Glenn joined Paylocity in 2013 and was serving as Senior Vice-President (SVP) of Finance before the promotion.

CEO Steve Beauchamp will continue with the company as Co-CEO and a Board member. Meanwhile, Michael Haske, Paylocity’s COO, will leave on September 1.

Commenting on the news, Needham analyst Scott Berg said that the promotions of Glenn and Williams hardly come as a surprise, given their years of experience. In the new role, Glenn will report to Williams, who will oversee areas like finance, HR, operations, and corporate strategy, Berg added.

Further, Haske’s departure is unlikely to have any impact on the company’s short-term sales, as he passed on most of his daily sales responsibilities to the new Sales SVP, Josh Scutt, almost two years ago, the analyst said.

Berg has maintained a Buy rating on the stock with a price target of $325 (71.4% upside potential). He expects the company’s Fiscal 2022 revenue to grow in the high-teens range, helped by HCM and payroll segments.

Based on 11 Buys and one Hold, Paylocity has a Strong Buy consensus rating. The average PCTY price target of $260.33 implies 37.3% upside potential from current levels. Shares have lost 31.8% over the past six months.

Investors’ Sentiments

TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on Paylocity, as 13.1% of investors on TipRanks increased their exposure to the stock over the past 30 days.

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