On Jan 2, we issued an updated research report on Paylocity Holding Corporation PCTY.
Notably, Paylocity holds a significant position in the payroll processing and human capital management market backed by its strong product suite.
The robust product portfolio has helped in expansion of the company’s clientele, which eventually resulted in 25% year-over-year growth in fiscal first-quarter 2018 revenues.
Key Catalysts in Detail
The company’s Software as a Service (SaaS) based human capital management (HCM) services have aided top-line growth. We also remain positive about Paylocity’s regular investments in SaaS technology.
SaaS HCM solutions that minimize data integrity issues across applications and ease implementations compared to those offered by traditional software providers are being adopted by organizations on a large scale.
According to Gartner, the global SaaS market is expected to increase at a five-year compound annual growth rate (CAGR) (2016–2020) of 15.65%. With its SaaS-based applications, we think that Paylocity is well positioned to lead the market.
For the last few quarters, clients moving from traditional payroll service providers to the company’s SaaS-based services contributed significantly to its revenues. Hence, regular investments in technological upgrades, along with product innovation, will continue to boost the company’s top line.
Paylocity Holding Corporation Revenue (TTM)
Paylocity Holding Corporation Revenue (TTM) | Paylocity Holding Corporation Quote
Additionally, we believe, that growth of Paylocity’s Affordable Care Act (ACA) dashboard application that tracks employee count, employee status and health care plan affordability is another tailwind and will carry the trend going ahead.
Furthermore, Paylocity is a cash-rich company with a strong balance sheet. Since it has no debt on its balance sheet, the existing cash can be used for pursuing strategic acquisitions, investment in growth initiatives and rewarding shareholders.
Shares of Paylocity have surged 55.1% the last year, outperforming the 28.6% rally of the industry it belongs to.
We believe that with a strong balance sheet, an enriched SaaS based product portfolio and an increasing client base, the company is well poised to enjoy steady growth going ahead.
Zacks Rank and Key Picks
Paylocity has a Zacks Rank #2 (Buy).
A few top-ranked stocks in the broader technology sector are NVIDIA Corporation NVDA, Broadcom Limited AVGO and Micron Technology, Inc. MU, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term EPS growth rate for NVIDIA, Broadcom and Micron is projected to be 10.3%, 13.8% and 10%, respectively.
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