What happened
Paylocity (PCTY 0.40%) posted a first-quarter earnings beat at the end of October, and shares went on to climb in November thanks to momentum in the broader market and favorable analyst coverage. The stock gained 19.2% in the month, according to data from S&P Global Market Intelligence.
Paylocity reported first-quarter results on Oct. 30, delivering sales and earnings that topped the market's estimates. Revenue climbed 26% year over year to come in at $126.7 million, beating the average analyst's target for sales of $124.15 million. Non-GAAP (adjusted) earnings per share for the quarter were $0.36, surpassing the average analyst target of $0.26.
The stock actually declined slightly following the late-October earnings release, but market momentum and the positive analyst coverage in November helped push the company's share price to a new high.
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So what
Paylocity has been on a tear this year. After posting relatively muted gains in October due to a pullback for enterprise-cloud company valuations, the human-resources software provider's stock saw more pronounced growth in November.
Analysts at BidaskClub published a note on Paylocity on Nov. 13, raising the rating on the stock from a hold to a buy. A subsequent note was then published on Nov. 21 that raised the analysts' rating on Paylocity to a strong buy.
KeyBanc analyst Arvind Ramnani then published a note on Nov. 25 maintaining an overweight rating on the stock and raising his price target from $115 per share to $124. Ramnani stated that he was optimistic about the company's ability to continue delivering sales growth north of 20% thanks to the strength of its offerings in the human resources software-as-a-service space, according to TheFly.com.
Now what
Paylocity stock has slipped a bit in December, with shares trading down roughly 2.5% in the month so far.
It expects sales for the second quarter to come in between $129.5 million and $130.5 million, working out to 21.5% growth year over year at the midpoint of the target. Second-quarter adjusted EBITDA is projected to be between $30 million and $31 million.
Management is targeting full-year sales between $567 million and $569 million, representing growth of roughly 22% at the midpoint. Adjusted EBITDA for the year is expected to be between $163.5 million and $165.5 million.
Shares trade at roughly 119 times this year's expected earnings and 11 times expected sales.
