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Why Paycom Software Is Soaring Today

By Brian Feroldi – Updated Apr 24, 2019 at 11:04AM

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Shares scream higher after management reports blowout quarterly results and issues bullish guidance.

What happened

In response to reporting strong fourth-quarter results and sharing expectation-topping guidance, shares of Paycom Software (PAYC -1.33%), a fast-growing company focused on the needs of human resources departments, had jumped 10% as of 11:55 a.m. EST on Wednesday.

So what

Here's a look at the key numbers from the company's fourth quarter:

  • Revenue rose 32% to $150.3 million. This number handily exceeded guidance and blasted past Wall Street's estimate of $144 million in revenue.
  • Adjusted EBITDA grew 19% to $57.5 million. This number was $6 million above the high end of guidance.
  • Non-GAAP (generally accepted accounting principles) net income declined 33% to $35.4 million or $0.61 per share. The decline can be attributed to changes in the U.S. tax code and elevated spending in the company's commercial footprint. This figure was $0.05 higher than the consensus analyst estimate.
Business people cheering

Image source: Getty Images.

Management projected that the good times would continue to roll in the upcoming quarter and year, too:

  • First-quarter revenue is expected to land between $194 million and $196 million. This implies growth of 27% at the midpoint and compares very well to the $191 million in revenue that analysts were expecting.
  • Adjusted EBITDA is expected to grow 21% to a range of $97 million to $99 million.
  • Full-year 2019 revenue is expected to land between $710 million and $712 million. This implies 26% growth at the midpoint. It is also comfortably ahead of the $696 million that Wall Street had modeled.
  • Full-year 2019 adjusted EBITDA is expected to grow 20% to a range of $288 million to $290 million. 

Given the expectation-topping results and upbeat guidance, it isn't hard to figure out why shareholders are having a great day. 

Check out the latest Paycom earnings call transcript.

Now what

Paycom's results clearly indicate that the company is having a lot of success with grabbing market share in the payroll processing market. What's more, on the conference call with investors, CEO Chad Richinson stated that the company's client retention rate had increased to 92% for the full year. That's should be music to investors' ears. 

Paycom has already established a history of outperforming its own financial targets and then raising guidance. With plenty of white space left to conquer, there's no reason to believe that this trend won't persist throughout 2019.

Brian Feroldi owns shares of Paycom Software. The Motley Fool owns shares of and recommends Paycom Software. The Motley Fool has a disclosure policy.

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