US$307 - That's What Analysts Think Paycom Software, Inc. Is Worth After These Results
Last week, you might have seen that Paycom Software, Inc. (NYSE:PAYC) released its full-year result to the market. The early response was not positive, with shares down 9.3% to US$294 in the past week. Paycom Software reported US$738m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$3.09 beat expectations, being 2.5% higher than what analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Check out our latest analysis for Paycom Software
After the latest results, the 15 analysts covering Paycom Software are now predicting revenues of US$913.6m in 2020. If met, this would reflect a substantial 24% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to rise 9.4% to US$3.43. Yet prior to the latest earnings, analysts had been forecasting revenues of US$907.6m and earnings per share (EPS) of US$3.70 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.
Although analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 16% to US$307, suggesting the revised estimates are not indicative of a weaker long-term future for the business. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Paycom Software analyst has a price target of US$372 per share, while the most pessimistic values it at US$189. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Further, we can compare these estimates to past performance, and see how Paycom Software forecasts compare to the wider market's forecast performance. We can infer from the latest estimates that analysts are expecting a continuation of Paycom Software's historical trends, as next year's forecast 24% revenue growth is roughly in line with 29% annual revenue growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 12% next year. So although Paycom Software is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Paycom Software. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Paycom Software going out to 2021, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
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