Paycom Software, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

Investors in Paycom Software, Inc. (NYSE:PAYC) had a good week, as its shares rose 2.8% to close at US$167 following the release of its second-quarter results. The result was positive overall - although revenues of US$438m were in line with what the analysts predicted, Paycom Software surprised by delivering a statutory profit of US$1.20 per share, modestly greater than expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for Paycom Software

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Following the latest results, Paycom Software's 21 analysts are now forecasting revenues of US$1.87b in 2024. This would be a modest 5.1% improvement in revenue compared to the last 12 months. Statutory per share are forecast to be US$8.19, approximately in line with the last 12 months. Before this earnings report, the analysts had been forecasting revenues of US$1.87b and earnings per share (EPS) of US$7.82 in 2024. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target was unchanged at US$188, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Paycom Software at US$260 per share, while the most bearish prices it at US$147. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Paycom Software's past performance and to peers in the same industry. We would highlight that Paycom Software's revenue growth is expected to slow, with the forecast 10% annualised growth rate until the end of 2024 being well below the historical 21% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.2% annually. Even after the forecast slowdown in growth, it seems obvious that Paycom Software is also expected to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Paycom Software's earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Paycom Software going out to 2026, and you can see them free on our platform here..

Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Paycom Software that you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com