Paylocity Holding Corporation Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next
Paylocity Holding Corporation (NASDAQ:PCTY) just released its second-quarter report and things are looking bullish. The company beat both earnings and revenue forecasts, with revenue of US$146m, some 2.0% above estimates, and statutory earnings per share (EPS) coming in at US$0.17, 289% ahead of expectations. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Check out our latest analysis for Paylocity Holding
Taking into account the latest results, the current consensus from Paylocity Holding's 16 analysts is for revenues of US$625.3m in 2021, which would reflect an okay 7.0% increase on its sales over the past 12 months. Statutory earnings per share are forecast to nosedive 24% to US$0.95 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$625.3m and earnings per share (EPS) of US$0.92 in 2021. So the consensus seems to have become somewhat more optimistic on Paylocity Holding's earnings potential following these results.
The consensus price target rose 6.0% to US$215, suggesting that higher earnings estimates flow through to the stock's valuation as well. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Paylocity Holding at US$230 per share, while the most bearish prices it at US$111. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Paylocity Holding's revenue growth is expected to slow, with forecast 7.0% increase next year well below the historical 21%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 14% next year. Factoring in the forecast slowdown in growth, it seems obvious that Paylocity Holding is also expected to grow slower than other industry participants.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Paylocity Holding's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Paylocity Holding's revenues are expected to perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Paylocity Holding analysts - going out to 2025, and you can see them free on our platform here.
It is also worth noting that we have found 1 warning sign for Paylocity Holding that you need to take into consideration.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
