Paycom Software, Inc. (NYSE:PAYC) investors will be delighted, with the company turning in some strong numbers with its latest results. It was overall a positive result, with revenues beating expectations by 2.5% to hit US$484m. Paycom Software also reported a statutory profit of US$1.58, which was an impressive 25% above what the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus from Paycom Software's 17 analysts is for revenues of US$2.05b in 2025. This would reflect a satisfactory 4.6% increase on its revenue over the past 12 months. Statutory per share are forecast to be US$7.43, approximately in line with the last 12 months. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.03b and earnings per share (EPS) of US$7.07 in 2025. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
See our latest analysis for Paycom Software
There's been no major changes to the consensus price target of US$250, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Paycom Software analyst has a price target of US$310 per share, while the most pessimistic values it at US$208. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Paycom Software shareholders.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Paycom Software's revenue growth is expected to slow, with the forecast 9.4% annualised growth rate until the end of 2025 being well below the historical 19% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.8% per year. 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 most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Paycom Software following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting that it's tracking in line with expectations. Additionally, our data suggests that revenue is 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 in mind, we wouldn't be too quick to come to a conclusion on Paycom Software. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Paycom Software analysts - going out to 2027, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Paycom Software , and understanding it should be part of your investment process.
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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.