Paycom Software (NYSE:PAYC) is one of those new acronym companies that have had quite run in the past year.
It’s an HCM SaaS company that is up 96% year to date.
What does that all mean?
It’s a human capital management (HCM) company, which means it manages the entire human resources life cycle of employees from recruitment to retirement. It’s software as a solution (SaaS), which means its platform uses cloud-based software that operates independently and complementary to whatever platforms businesses are running, so integration is very easy.
And of course, 96% year to date is PAYC stock’s performance since 2019 started. In the past 12 months, the stock is up 137%. What’s more, after it reported its first-quarter earnings in late April, investment house Stifel Nicolaus raised its price target on PAYC from $150 to $179.
The stock has been surprising analysts to the upside for a while now, which becomes increasingly harder since each quarter you beat the street, they raise the bar just a little higher.
Solid Q1 Results for PAYC Stock
Its most recent quarter earnings came in at $1.19 a share, when analysts were expecting $1.12. That was a 24% increase compared to the same quarter a year ago.
Revenue was up 30% year-over-year, which also beat analysts’ estimates. Its gross profit grew 30% and its gross margins expanded slightly to a mouth-watering 86.8%. It’s hard to see how the margin could get much better, but if anyone can do it, it would be PAYC.
Paycom has a stock repurchase plan, which helps manage the float on the stock and keep the price up. And it’s very shareholder-friendly.
Best of all, at least where the Street is concerned, it issued bullish forward guidance for the rest of the year.
There are plenty of times when companies report strong earnings numbers but then warn about a slowdown moving forward. In this market, that will hammer a stock.
And given the fact that the economy looks like it’s cooling, it wouldn’t be too surprising to see a company guide toward the lower end of its current range, or lower its range and guide to the top of a lower range.
Paycom Is an All-Encompassing HCM Software
PAYC continues to crush it.
That’s certainly understandable since many companies that have survived the decade-long claw back from the 2008 financial crisis have embraced technology as a way to leverage operations.
Since HR is usually not a core competency of businesses, and HR rules and regulations are increasingly complex, you either have to staff an entire department of HR and payroll workers to manage all this, or you can outsource and focus on a handful of in-house pros to manage PAYC.
This is especially true of smaller companies that are looking to scale up quickly. There are certainly competitors in the space, but some focus more on payroll and benefits management, where others are more HR-focused. PAYC remains one of the best in class in the big HCM picture.
That’s why my Portfolio Grader gives PAYC stock a rock-solid A rating.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.