Earnings Beat: Paycom Software, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

There's been a notable change in appetite for Paycom Software, Inc. (NYSE:PAYC) shares in the week since its third-quarter report, with the stock down 10% to US$237. Revenues were US$544m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$2.99, an impressive 25% ahead of estimates. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

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Taking into account the latest results, the most recent consensus for Paycom Software from 20 analysts is for revenues of US$2.38b in 2027. If met, it would imply a solid 8.8% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to ascend 16% to US$13.34. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.37b and earnings per share (EPS) of US$12.22 in 2027. So the consensus seems to have become somewhat more optimistic on Paycom Software's earnings potential following these results.

Check out our latest analysis for Paycom Software

The consensus price target rose 9.9% to US$276, suggesting that higher earnings estimates flow through to the stock's valuation as well. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Paycom Software at US$331 per share, while the most bearish prices it at US$200. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Paycom Software's revenue growth is expected to slow, with the forecast 7.0% annualised growth rate until the end of 2027 being well below the historical 14% p.a. growth over the last five years. Compare this to the 153 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 6.1% per year. Factoring in the forecast slowdown in growth, it looks like Paycom Software is forecast to grow at about the same rate as 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. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Paycom Software going out to 2028, and you can see them free on our platform here.

It is also worth noting that we have found 2 warning signs for Paycom Software that you need to take into consideration.

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