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Paycom Software, Inc. : PAYC

Article Authored by: Sraavya Pradeep

Paycom Software, Inc. provides cloud-based human capital management (HCM) software service for small to mid-sized companies in the United States. It provides functionality and data analytics that businesses need to manage the employment life cycle from recruitment to retirement. The company's HCM solution offers a suite of applications in the areas of talent acquisition, including applicant tracking, candidate tracker, background checks, on-boarding, e-verify, and tax credit services; and time and labor management, such as time and attendance, scheduling/schedule exchange, time-off requests, labor allocation, labor management reports/push reporting, and geofencing/geotracking. Its HCM solution also provides payroll applications comprising payroll and tax management, Paycom pay, expense management, garnishment management, mileage tracker/fixed and variable rates, and GL concierge applications; and talent management applications that include employee self-service, compensation budgeting, performance management, executive dashboard, and Paycom learning and course content. In addition, the company's HCM solution offers HR management applications, which comprise document and task management, government and compliance, benefits administration/benefits to carrier, COBRA administration, personnel action forms, surveys, and affordable care act applications. Paycom Software, Inc. was founded in 1998 and is headquartered in Oklahoma City, Oklahoma.

Analysis : PAYC

  • PAYC reported a surprise 4th quarter earnings on February 5th, 2019. Wall street was expecting an EPS of $0.56 on a revenue of 143.9 million. The company reported $0.63 on a revenue of 150.3 million. PAYC alsoincreased its revenue forecast for the upcoming quarter between 194 and 196 million (earlier consensus estimate was around 191 million). The stock price surged almost 19% after its earnings. From the chart above, you may observe that PAYC earning surprise has been consistent in the last few quarters. This stock has doubled in the last 14 months.

  • Paycom Software, Inc. has a market capital of 10.33B and has 58.6M of outstanding shares. P/E is 43.95 and pays no dividend at this time. Some of its competitors include Manhattan Associates Inc. (MANH), Paychex Inc (PAYX), Ultimate Software Group Inc. (ULTI), Automatic Data Processing Inc. (ADP).

  • Where is the stock heading from here? Would the stock sustain its upward momentum? Is the stock not overpriced at this time? While the stock is bullish and has demonstrated a strong upward trend, our proprietary pattern recognition system observes an immediate consolidation of its price movement. This stock has likely entered an overbought region. Here are some statistics:
    • The Relative Strength Index (RSI), a momentum oscillator developed by J. Welles Wilder, measures the speed and change of price movements. The RSI has a range between 0 and 100. Traditionally, the stock is considered overbought when RSI is above 70 and oversold when it is below 30. 

    • "Buy/Sell" volume ratio is a proprietary indicator that measures the buy and sell volume of a security. This represents the strength of the move in either direction. This oscillator ranges between 0 and 100, however the characteristics widely differ based on the trading volume and momentum. For Paycom Software, Inc. the oversold and overbought is fixed at 66 and 18.

    • Another important volatility indicator to consider is the 14 day ATR (Average True Range). Average True Range is not a directional indicator and it represents the energy behind the move. Beta coefficient (β) measures the volatility of a stock with respect to the market. As of the trigger date, Paycom Software, Inc. ATR is 177 and and beta for Paycom Software, Inc. is (3Y Monthly) 1.62.

    • For reasons explained above, we believe that there is a high probability for this stock to make a 10% correction in its price. Our immediate price target (30-60 days) is between $150 and $170.

  • We are an investment research organization specializing in financial market analysis and simulation modeling. Our specialty includes financial research & market analysis, financial system thinking, mathematical modeling of trading patterns and near time price prediction of a registered security. We are not a registered investment advisor or a financial advisor or a brokerage firm or an investment company. Please read our disclaimer at http://www.theoryofstocks.com/US/Home/index.php/disclaimer.

Financial information cited in this article are taken from Yahoo Finance (http://www.yahoo.com/finance); EPS data is taken from Zacks Research (http://www.zacks.com); some of the definitions have been taken from Wikipedia (www.wikipedia.com)

 

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