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Why Paycom Software Stock Was Soaring This Week

By Brett Schafer – Aug 5, 2021 at 6:52PM

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The company released strong earnings and raised its full-year guidance.

What happened

Paycom Software (PAYC -0.57%) produced a better than expected earnings report for the second quarter, sending the stock up as much as 14.4% for the week. As of 5:16 p.m. EDT on Thursday, the stock was up 14.3% in only a few trading days.

So what

On Aug. 3, Paycom Software released its second-quarter earnings report. Revenue was up 33% to $242.1 million, with GAAP net income coming in at $52.3 million. This led Paycom's quarterly earnings per share (EPS) to hit $0.97, beating the consensus analyst estimate of $0.83. A strong EPS number is a big reason why investors bid up the stock this week.

A stock chart with a blue background.

Image source: Getty Images.

Investors were also likely happy to see Paycom raise its revenue guidance for the full fiscal year to $1.036 billion-$1.038 billion, up from the $1.017 billion-$1.019 billion range it gave last quarter. Paycom provides software-as-a-service (SaaS) products for payroll, employee management, and HR departments. With employment numbers ticking back up in the U.S., Paycom is likely seeing a boost in usage of its products.

Now what

Paycom Software stock has been a huge winner since going public in 2014. The stock is up almost 3,000% during its time as a publicly traded company, greatly outpacing the broad market S&P 500 index during that timespan. With a market cap of $22.2 billion, shares trade at an expensive price-to-sales ratio north of 20, which is a slight concern for anyone invested in the company. But if Paycom can keep putting up 33% revenue growth over the next few years and beyond, the stock should continue to perform well for shareholders. 

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Paycom Software. The Motley Fool has a disclosure policy.

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