The most recent earnings announcement Paylocity Holding Corporation's (NASDAQ:PCTY) released in August 2019 confirmed that the business benefited from a strong tailwind, leading to a double-digit earnings growth of 39%. Below is a brief commentary on my key takeaways on how market analysts view Paylocity Holding's earnings growth trajectory over the next couple of 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' prospects for the coming year seems positive, with earnings expanding by a robust 11%. This growth seems to continue into the following year with rates arriving at double digit 53% compared to today’s earnings, and finally hitting US$96m by 2022.
While it is informative understanding the rate of growth each year relative to today’s value, it may be more valuable evaluating the rate at which the earnings are moving every year, on average. The pro of this method is that we can get a bigger picture of the direction of Paylocity Holding's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I've inserted 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 20%. This means, we can presume Paylocity Holding will grow its earnings by 20% every year for the next couple of years.
For Paylocity Holding, I've compiled three pertinent factors you should look at:
- 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.
- Future Earnings: How does PCTY's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
- 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!
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.