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Why Paycom Software Stock Dropped 11% in February

By John Ballard - Mar 6, 2020 at 1:20PM

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The software solutions provider posted another quarter of robust growth, but investors were looking for more.

What happened

Shares of Paycom Software (PAYC -1.40%) lost 11.2% last month, according to data provided by S&P Global Market Intelligence.

The human resources software provider reported earnings in early February that didn't meet investors' expectations, but the numbers overall looked good. 

A hand holding a smartphone with a human resources application displayed.

Image source: Getty Images.

So what

Revenue growth for the fourth quarter was healthy at 29% year over year, which drove an equally impressive performance on the bottom line, with adjusted EBITDA up 37% over the same quarter a year ago. Also encouraging was that the annual retention rate increased by 1 point to 93%. 

In a statement, CEO Chad Richison said, "Our differentiated product strategy is driving rapid revenue growth, and high employee usage is driving higher annual revenue retention."

Now what

Richison sees another good year shaping up, but more importantly, he sees momentum continuing over the long term. "Based on the strong momentum we are seeing, we believe we are well positioned to deliver an enviable combination of high revenue growth and high margins for years to come," he said in a press release.

The 2020 outlook calls for revenue to be up 24% over 2019, with adjusted EBITDA increasing by 21%.  Its ability to put up numbers like this is why the stock remains high on investors' radar.

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