The most recent earnings update Paylocity Holding Corporation’s (NASDAQ:PCTY) released in June 2018 confirmed that the business experienced a significant tailwind, more than doubling its earnings from the prior year. Below is a brief commentary on my key takeaways on how market analysts predict Paylocity Holding’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Market analysts’ consensus outlook for the coming year seems rather muted, with earnings climbing by a single digit 5.4%. The growth outlook in the following year seems much more positive with rates reaching double digit 47% compared to today’s earnings, and finally hitting US$67m by 2021.
While it’s informative understanding the growth rate each year relative to today’s level, it may be more valuable estimating the rate at which the company is moving every year, on average. The pro of this method is that it ignores near term flucuations and accounts for the overarching direction of Paylocity Holding’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I’ve appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 19%. This means that, we can presume Paylocity Holding will grow its earnings by 19% every year for the next couple of years.
For Paylocity Holding, I’ve put together three important 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 PCTY 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 PCTY is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of PCTY? 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 email@example.com.