It has been about a month since the last earnings report for Paycom Software (PAYC). Shares have added about 3.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Paycom due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Paycom Software Reports Q4 Results
Paycom Software’s fourth-quarter 2018 non-GAAP earnings per share came in at 61 cents per share, which surpassed the Zacks Consensus Estimate of 56 cents. Adjusted earnings per share in the year-ago period were 90 cents.
Paycom Software generated revenues of $150.3 million, surging 32% from the year-earlier period and also outpaced the Zacks Consensus Estimate of $144 million, driven by new business wins. Robust adoption of enhanced HCM software solutions across industries and geographies is a key catalyst.
Moreover, revenues were positively by a 32% year-over-year increase in recurring revenues, which comprised around 98% of total revenues.
Adjusted gross profit jumped 32.5% from the year-ago period to $126.7 million. The company’s adjusted gross margin expanded 50 basis points (bps) on a year-over-year basis to 84.3%.
As a percentage of revenues, total adjusted administration expenses, sales and marketing expenses plus research and development expenses of 52.1%, 27% and 8.3%, respectively, expanded 580 bps, 180 bps and 210 bps, each.
Paycom Software’s adjusted EBITDA rose 18.7% year over year to $57.5 million.
Balance Sheet & Cash Flow
Paycom Software exited the fourth quarter with cash and cash equivalents of $45.7 million compared with $85 million in the sequential quarter.
The company’s balance sheet comprises long-term debt of $34.4 million compared with $34.8 million sequentially.
Net cash provided by operating activities in the reported quarter was $39 million.
The company repurchased more than 500,000 shares in the quarter under review.
For first-quarter 2019, Paycom Software expects revenues in the range of $194-$196 million. Adjusted EBITDA is expected to be in the band of $97-$99 million.
Paycom Software provided forecasts for the full year. The company envisions revenues within $710-$712 million. Adjusted EBITDA is estimated in the bracket of $288-$290 million. The company predicts adjusted gross margin within 83-85%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -7.53% due to these changes.
Currently, Paycom has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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.
Paycom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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