Paycom’s 3Q Sales Jump 12% As New Clients Line Up

Paycom Software’s 3Q revenues increased 12.3% to $196.5 million year-on-year reflecting new business wins which more than offset the negative impact of lower headcounts at its pre-pandemic client offices. The online payroll and human resource technology company’s sales surpassed analysts’ expectations of $192 million.

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Paycom’s (PAYC) 3Q adjusted EPS of $0.70 topped Street estimates of $0.55 and were flat on a year-over-year basis. Despite the upbeat quarterly performance, shares fell 3.1% in Wednesday’s extended trading session. Shares have rallied 50% on a year-to-date basis.

“We had an excellent third quarter and continue to see very strong demand for our differentiated solutions,” said Paycom’s CEO, Chad Richison. “We are putting greater distance between our product’s value proposition and that of our competitors. We believe Paycom is the clear choice for those seeking a more efficient way to manage their Human Capital Management needs.”

For 4Q, Paycom forecasts revenues of between $212 million and $214 million. Adjusted EBITDA is expected to land in the range of $76-$78 million. (See PAYC stock analysis on TipRanks)

Ahead of the earnings release, Needham analyst Ryan McDonald reiterated his Buy rating and the price target of $316 (20.5% downside potential). In a Nov. 2 note to investors, McDonald wrote, “our Payroll/HCM industry checks indicate new customer bookings have re-accelerated to pre-COVID levels. As a result, we expect investors to be positively surprised by new customer bookings similar to what occurred in Q2.”

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 7 Buys, 3 Holds, and 1 Sell. The average price target of $352.91 implies downside potential of about 11.2% to current levels.