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Paylocity (PCTY) Up 9.8% Since Earnings Report: Can It Continue?

Zacks Equity Research
In the latest trading session, Texas Instruments (TXN) closed at $94.48, marking a +1.08% move from the previous day.

It has been about a month since the last earnings report for Paylocity Holding Corporation PCTY. Shares have added about 9.8% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is PCTY due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Paylocity Q3 Earnings, Revenues Surpass Estimates

Paylocity reported third-quarter fiscal 2018 non-GAAP earnings of 52 cents per share, which surpassed the Zacks Consensus Estimate of 47 cents per share. Non-GAAP earnings also increased 30% from the year-ago quarter.

Quarter Details

The company’s revenues came in at $113.4 million, reflecting an increase of 25.6% year over year and beating the Zacks Consensus Estimate of $111 million.

The top line was also driven by a 25.8% rise in recurring revenues (95.7% of total revenues) and a 23.3% increase in implementation and other revenues.

The company’s non-GAAP gross profit came in at $79.6 million, up 29.1% year over year. Non-GAAP gross margin expanded 190 basis points (bps) year over year to 68.3%

Adjusted EBITDA increased 33.3% from the year-ago quarter to $35.8 million.

Paylocity exited the quarter with cash and cash equivalents of $129.5 million compared with $110 million in the previous quarter. The company has no long-term debt. It generated $35.2 million of cash flow from operational activities during the quarter compared with $26 million during the prior quarter.

Guidance

The company provided outlook for the fourth quarter and fiscal 2018. For the fourth quarter, Paylocity expects revenues in the range of $92.6-$93.6 million. Adjusted EBITDA is projected in the band of $14-$15 million.

The company raised guidance for fiscal 2018. Paylocity now anticipates revenues in the range of $373.5-$374.5 million (previous guidance $369-$371 million). Adjusted EBITDA is now projected in the range of $79.6¬$80.6 million (previous guidance $76-$77 million).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter compared to two lower. Last month, the consensus estimate has shifted by 27.6% due to these changes.

VGM Scores

At this time, PCTY has a great Growth Score of A, though it is lagging a lot on the momentum front with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than momentum investors.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, PCTY has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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