In June 2018, Paylocity Holding Corporation (NASDAQ:PCTY) announced its earnings update. Overall, it seems that analyst expectations are fairly bearish, as a 1.7% rise in profits is expected in the upcoming year, against the higher past 5-year average growth rate of 51.9%. With trailing-twelve-month net income at current levels of US$38.6m, we should see this rise to US$39.3m in 2019. Below is a brief commentary around Paylocity Holding’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
What can we expect from Paylocity Holding in the longer term?
The longer term expectations from the 15 analysts of PCTY is tilted towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
From the current net income level of US$38.6m and the final forecast of US$66.9m by 2021, the annual rate of growth for PCTY’s earnings is 18.0%. EPS reaches $1.24 in the final year of forecast compared to the current $0.74 EPS today. Growth in the bottom line seems to suggest reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. However, the near term margin expansion is expected to shrink heading into 2021, from the current levels of 10.2% to 10.1%.
Future outlook is only one aspect when you’re building an investment case for a stock. For Paylocity Holding, I’ve compiled three relevant factors you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Paylocity Holding worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Paylocity Holding is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Paylocity Holding? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.