Paycom (PAYC) Down 17.6% Since Last Earnings Report: Can It Recover?

A month has passed since Paycom Software’s (PAYC) last earnings report. Shares have lost about 17.6% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Paycom due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the company’s most recent earnings report in order to better understand the important catalysts.

Best Paycom Earnings and Revenue Estimates for Q3, YoY Growth

On Tuesday, Paycom Software published its third-quarter 2021 results. The online payroll technology provider’s adjusted earnings of 92 cents per share missed the Zacks Consensus Estimate by a penny and rose 31.4% year over year.

Quarter in detail

The company generated revenue of $256.2 million, up 30.4% from the same period last year and also exceeding the consensus estimate of $250.4 million. This year-over-year growth was primarily due to new customer additions and continued focus on cross-selling to existing customers.

Adjusted gross profit increased 28.8% compared to the prior-year period to $214.8 million. However, adjusted gross margin declined 110 basis points (bps) year-over-year to 83.8%, primarily due to employees returning to offices and aggressive hiring.

Paycom Software’s adjusted EBITDA increased 32.9% year over year to $89.7 million. However, adjusted EBITDA margin declined 210 basis points to 35.9%, primarily due to lower gross margin and increased investments in sales and marketing and research and development.

Balance sheet and cash flow

Paycom Software ended the third quarter with cash and cash equivalents of $230.9 million, compared to $202.4 million reported in the prior quarter.

The company’s balance sheet includes net long-term debt of $27.8 million, up from $28.3 million in the prior quarter.

Cash from operations was $83.2 million for the quarter. It generated operating cash flow of $229.6 million in the first half of 2021.

Conductivity

Buoyed by better-than-expected third-quarter results, Paycom Software increased its revenues and revised its EBITDA guidance for full-year 2021. The company now forecasts 2021 revenues of $1.045 billion to $1.047 billion, up from the previous range of $1.036 billion to $1.038 billion. billion. Adjusted EBITDA guidance has now been revised upwards to $413-415 million from the previously expected $410-412 million.

Paycom Software estimates fourth-quarter revenues at $274.5 million to $276.5 million. Management forecasts adjusted EBITDA of $103 million to $105 million.

How have estimates changed since then?

Over the last month, investors have seen an upward trend in new estimates.

VGM results

Currently, Paycom has an average growth score of C, which indicates the same momentum score. Plotting a somewhat similar path, the stock received a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has a Total VGM Score of D. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company generally show an upward trend, and the scale of these corrections looks promising. Notably, Paycom carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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Paycom Software, Inc. (PAYC): Free Inventory Analysis Report

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