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It has been about a month since the last earnings report for Paycom Software (PAYC). Shares have lost about 4.3% in that time frame, 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 most recent earnings report in order to get a better handle on the important catalysts.
Paycom Beats Q4 Earnings & Revenue Estimates
Paycom reported better-than-anticipated fourth-quarter 2020 results on Wednesday. The online payroll and human resource technology provider’s adjusted earnings of 84 cents per share beat the Zacks Consensus Estimate of 81 cents but declined 2.3% year over year.
The company generated revenues of $220.9 million, which increased 14.2% from the year-earlier period as well as surpassed the consensus mark of $213.9 million. This year-over-year increase was mainly driven by new client additions, which offset the negative impact of interest-rate cuts and lower headcounts at client offices.
In its earnings conference call, Paycom noted that lower headcounts at its pre-pandemic client offices resulted in $1.9-$2million weekly recurring revenue loss during the quarter. Moreover, the 150-basis-point interest-rate cut in March 2020 led to an additional weekly recurring revenue loss of $350,000.
Adjusted gross profit increased 14.5% from the year-ago period to $188.9 million. Further, adjusted gross margin expanded 20 basis points (bps) on a year-on-year basis to 85.5%.
Paycom Software’s adjusted EBITDA increased 7.2% year on year to $84.2 million. However, adjusted EBITDA margin shrunk 250 bps to 38.1%.
Balance Sheet & Cash Flow
Paycom Software exited 2020 with cash and cash equivalents of $151.7 million compared with the $133.7 million recorded in the prior year.
The company’s balance sheet comprises net long-term debt of $29.1 million compared with the previous year’s $30.9 million.
Cash from operations was $227.2 million in 2020, and the firm repurchased approximately $52 million worth of its common stock.
For the first quarter, Paycom Software estimates revenues to lie between $270 million and $272 million. The Zacks Consensus Estimate is pegged at $268.6 million.
Management projects adjusted EBITDA in the range of $126 million to $128 million.
For 2021, the company forecasts revenues and adjusted EBITDA in the band of $1.009-$1.011 billion and $396-$398 million, respectively.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -6.99% due to these changes.
At this time, Paycom has a poor Growth Score of F, a grade with the same score on the momentum front. 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Paycom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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