A month has gone by since the last earnings report for Paycom Software (PAYC). Shares have added about 11.1% 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 drivers.
Paycom’s Q2 Earnings & Revenues Beat Estimates, Up Y/Y
Paycom Software reported second-quarter 2021 results on Tuesday. This online payroll and human resource technology provider’s adjusted earnings of 97 cents per share beat the Zacks Consensus Estimate by 16.9% and jumped 56.5% year over year.
Quarter in Detail
The company generated revenues of $242.1 million, which increased 33.3% from the year-earlier period and surpassed the consensus mark of $232.2 million as well. This year-over-year upswing was mainly driven by new client additions and continued focus on cross-selling to existing clients.
Adjusted gross profit climbed 34.5% from the year-ago period to $206.9 million. Moreover, adjusted gross margin expanded 70 basis points (bps) on a year-on-year basis to 85.4%.
Paycom Software’s adjusted EBITDA increased 42.2% year on year to $87 million. Further, adjusted EBITDA margin advanced 220 bps to 35.9%.
Balance Sheet & Cash Flow
Paycom Software exited the quarter with cash and cash equivalents of $202.4 million compared with the $215.1 million recorded in the previous quarter.
The company’s balance sheet comprises net long-term debt of $28.3 million compared with the previous quarter’s $29.1 million.
Cash from operations was $57 million in the quarter. During the first half of 2021, it generated an operating cash flow of $146.4 million.
For the third quarter, Paycom Software estimates revenues to lie between $249 million and $251 million. Management projects adjusted EBITDA of $87-$89 million.
For full-year 2021, the company forecasts revenues and adjusted EBITDA in the range of $1.036-$1.038 billion and $410-$412 million, respectively.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
At this time, Paycom has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren’t focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Paycom has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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