Paycom Software, Inc.PAYC is scheduled to report first-quarter 2018 results on May 1. The question lingering on investors' minds is whether this provider of cloud-based human capital management (HCM) software as a service solution can deliver a surprise.
Last quarter, the company delivered a positive earnings surprise of 26.1%. Notably, Paycom Software has outperformed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average positive surprise of 30.2%.
Let's see how things are shaping up for this announcement.
What the Zacks Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP . Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.
Paycom has a Zacks Rank #1 and an Earnings ESP of +0.33%. This indicates that the company is likely to beat estimates. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
The Zacks Consensus Estimate for the first quarter is pegged at 90 cents per share, indicating an increase of 91.5% from the year-ago quarter. Revenues are estimated to be around $151.29 million, indicating 26.6% increase on a year-over-year basis.
Factors to Consider
The company continues to gain from higher recurring revenues and traction in cloud-based offerings. Surge in demand for advanced human capital management and payroll software solutions is encouraging.
The company's client base is increasing with the help of its sales force. During the last reported quarter, management was particularly optimistic about the operations of its sales force, with senior sales people outperforming expectations. Pertaining to the stellar performance of the sales team, the company opened its 47th sales office in Rochester, NY during the first quarter.
Following the company's shift to ASC 606, effective Jan 1, 2018, margins are expected to improve significantly. This is because, per the new standard, the commission expense will be recognized ratably over the period till the contract is valid and not upfront.
Notably, Paycom also announced an increase in its stock repurchase plan. It added $100 million to the ongoing share repurchase program, which has been extended till Feb 12, 2020. This also indicates a strong balance sheet. The company is optimistic about the increase in the number of companies becoming aware of the benefits of new age human resource technologies. This will aid its top line.
Paycom Software, Inc. Price and EPS Surprise
Other Stocks to Consider
Here are some companies that you may also want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Seagate Technology PLC STX has an Earnings ESP of +3.43% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.
Analog Devices, Inc. ADI has an Earnings ESP of +0.20% and a Zacks Rank #1.
FireEye, Inc. FEYE has an Earnings ESP of +6.67% and a Zacks Rank #3.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.