Paycom Rides on Robust Adoption of HCM Software Solutions

On Sep 4, we issued an updated research report on Oklahoma-based Paycom Software, Inc.PAYC .

The company provides cloud-based human capital management software solution delivered as Software-as-a-Service. It provides functionality and data analytics that businesses need to manage the complete employment life cycle from recruitment to retirement.

Notably, Paycom has beaten the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average positive surprise of 26.17%.

The company reported strong second-quarter 2018 results. The top line and bottom line surpassed the respective estimates and improved year over year. Management also raised 2018 guidance.

We believe that the impressive results and the guidance will help sustain the stock's momentum. Notably, shares of Paycom have gained a whopping 94.5% year to date compared with the industry 's rally of 28.7%.

Cloud-based Offerings Drive Growth

Paycom is gaining traction from robust adoption of enhanced HCM software solutions, which remained a key revenue driver in the recently reported quarter. The company is gaining market share over the most critical client demand area of HCM, which in turn, supports its growth.

Moreover, new business wins and product development initiatives are also helping boost the company's top line.

Notably, it witnessed a 31% year-over-year increase in recurring revenues, which comprised around 98% of total revenues in the last reported quarter.

Paycom continues to invest in SaaS technology and mobile applications by acquiring SaaS-based businesses. According to Gartner, the global SaaS market is expected to increase at a four-year compound annual growth rate (2017-2021) of 18.1%. With its SaaS-based applications, we believe that it is well-positioned to lead the market.

The company believes that its mobile app, which meets all the functionality offered by employee self-service desktop application, positions it well for growth.

Zacks Rank & Other Stocks to Consider

Paycom currently sports a Zacks Rank #1 (Strong Buy).

A few other top-ranked stocks in the broader Computer and Technology sector are Attunity Ltd. ATTU , Fortinet, Inc. FTNT , and Five9, Inc. FIVN , each flaunting a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Long-term earnings growth for Attunity, Fortinet and Five9 is projected to be 20%, 16.8% and 20%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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