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Paylocity Hits 52-Week High on SaaS Services & Better Sales

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Paylocity Hits 52-Week High on SaaS Services & Better Sales

Paylocity (PCTY) benefits from expanding sales force, and increased client transition from traditional payroll services to the company's SaaS-based services.

Shares of Paylocity Holding Corporation PCTY rallied to a new 52-week high of $80.96, eventually closing a tad lower at $80.27 on Aug 30.

Notably, the stock has been witnessing an upside, appreciating 70.2% year to date compared with the industry’s rally of 27.3%.

The company is benefiting from broker referrals, which drive sales activity.  This is evident from its recently reported fourth-quarter fiscal 2018 results, wherein revenues from broker referrals constituted more than 25% of new business revenues for fiscal 2018.  

We note that the company has beaten the Zacks Consensus Estimate in three of the trailing four quarters, delivering an average positive surprise of 18%.

Paylocity currently has a Zacks Rank #2 (Buy). It has a market cap of $4.24 billion and a long-term expected earnings growth rate of 22%.

What’s Backing the Rally?

Paylocity is benefiting from its expanding sales force. The company has increased its sales force by 21% in fiscal 2018. This has boosted investor confidence as it is expected to be incremental to revenues, going forward.

Notably, the company recently launched an integration marketplace to enable clients to quickly review more than 300 integration partners and capabilities across various Human Capital Management (HCM) functions. The addition of the marketplace further strengthened Paylocity’s commitment to provide superior client-experience, potentially resulting in increased client additions and driving growth.

Paylocity’s continued investment in SaaS technology and mobile applications is also making its prospects promising. In the last few quarters, a significant portion of revenues was generated from clients moving from traditional payroll service providers to the company’s SaaS-based services.

According to Gartner, the global SaaS market is expected to witness a four-year compound annual growth rate (2017–2021) of 18.1%. These statistics along with the company’s SaaS-based applications are making investors optimistic.

The company is gaining market share over the most critical client demand area of HCM, which in turn, continues to support growth.

Moreover, Paylocity’s work-culture was recently acknowledged by a chain of company-rating platforms. It was declared as one of the best places to work by Crain, Forbes and Glassdoor. This has strengthened clients’ confidence in the company further.

Other Stocks to Consider

Few other top-ranked stocks in the broader Computer and Technology sector are Virtusa Corporation VRTU, Qualys, Inc. QLYS and Fortinet, Inc. FTNT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Virtusa, Qualys and Fortinet is projected to be 20%, 8% and 16.8%, respectively.

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