Yahoo Finance Earnings Beat: Paycom Software, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models
Last week, you might have seen that Paycom Software, Inc. (NYSE:PAYC) released its first-quarter result to the market. The early response was not positive, with shares down 9.3% to US$171 in the past week. It looks like a credible result overall - although revenues of US$500m were what the analysts expected, Paycom Software surprised by delivering a (statutory) profit of US$4.37 per share, an impressive 128% above what was forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
View our latest analysis for Paycom Software
Taking into account the latest results, the consensus forecast from Paycom Software's 20 analysts is for revenues of US$1.87b in 2024. This reflects a reasonable 7.4% improvement in revenue compared to the last 12 months. Statutory earnings per share are expected to reduce 4.3% to US$8.07 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$1.87b and earnings per share (EPS) of US$5.64 in 2024. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the sizeable expansion in earnings per share expectations following these results.
There's been no major changes to the consensus price target of US$200, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Paycom Software analyst has a price target of US$260 per share, while the most pessimistic values it at US$150. 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.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Paycom Software's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 9.9% growth on an annualised basis. This is compared to a historical growth rate of 21% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.6% per year. Even after the forecast slowdown in growth, it seems obvious that Paycom Software is also expected to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Paycom Software's earnings potential next year. Fortunately, they also reconfirmed their revenue numbers, suggesting that it's tracking in line with expectations. Additionally, our data suggests that revenue is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
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 2026, 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
