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Paycom Software (PAYC) Stock Sinks As Market Gains: What You Should Know

Zacks Equity Research

In the latest trading session, Paycom Software (PAYC) closed at $231.89, marking a -0.87% move from the previous day. This change lagged the S&P 500's 0.69% gain on the day. At the same time, the Dow added 0.65%, and the tech-heavy Nasdaq gained 0.58%.

Heading into today, shares of the maker of human-resources and payroll software had gained 3.62% over the past month, outpacing the Computer and Technology sector's gain of 2.27% and the S&P 500's gain of 1.36% in that time.

Investors will be hoping for strength from PAYC as it approaches its next earnings release, which is expected to be July 30, 2019. In that report, analysts expect PAYC to post earnings of $0.71 per share. This would mark year-over-year growth of 20.34%. Meanwhile, our latest consensus estimate is calling for revenue of $163.96 million, up 27.3% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $3.31 per share and revenue of $719.87 million, which would represent changes of +23.97% and +27.11%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for PAYC. These revisions typically reflect the latest short-term business trends, which can change frequently. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. PAYC is currently a Zacks Rank #2 (Buy).

In terms of valuation, PAYC is currently trading at a Forward P/E ratio of 70.76. Its industry sports an average Forward P/E of 64.69, so we one might conclude that PAYC is trading at a premium comparatively.

Meanwhile, PAYC's PEG ratio is currently 2.63. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. PAYC's industry had an average PEG ratio of 3.5 as of yesterday's close.

The Internet - Software industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 57, putting it in the top 23% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow PAYC in the coming trading sessions, be sure to utilize Zacks.com.

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