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Why Paycom Software Inc. Popped 16% in February

By Joe Tenebruso - Mar 15, 2017 at 5:01PM

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Sales and profits were sharply higher in the fourth quarter, which helped to drive the payroll solutions provider's stock to new highs.

What happened

Shares of Paycom Software (PAYC -4.48%) jumped by 16.4% last month, according to data provided by S&P Global Market Intelligence. The payroll solutions provider delivered a fourth-quarter earnings report that was well-received by investors.

Business people clapping and cheering

Image source: Getty Images.

So what

Paycom's revenue jumped 35% to $87.8 million, while adjusted net income and earnings per share soared 80% to $10.8 million and $0.18, respectively.

Those figures came in well above Wall Street's expectations of $86.2 million in revenue and $0.15 for EPS.

"This year we further elevated our visibility within the marketplace, improved our client reach and continued to empower businesses nationwide with our powerful, yet intuitive human capital management software solution," said founder and CEO Chad Richison in a press release. "With impressive annual revenue growth of 46.5 percent, we bolstered our market share and now serve over 17,800 clients from coast to coast."

Now what

Looking ahead, Paycom expects 2017 revenue of $422 million to $424 million, equal to year-over-year growth of more than 28%. 

The company continues to win new business at an impressive clip. And just as importantly, it excels at keeping its existing customers happy, as evidenced by a revenue retention ratio that's held steady at 91% for five consecutive years.

All told, as a leading provider of cloud-based payroll and human capital management software for small and midsize business, Paycom should continue to be a primary beneficiary of the growing demand for software solutions that help companies manage labor costs and improve employee engagement. As such, even after its February gains -- and an additional 4% rise so far in March -- Paycom Software remains an intriguing stock for investors to consider.

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Paycom Software, Inc. Stock Quote
Paycom Software, Inc.
$286.64 (-4.48%) $-13.44

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