Market Overview

5 Reasons Why KeyBanc Upgraded Paycom

Share:
5 Reasons Why KeyBanc Upgraded Paycom

Payroll and HR provider Paycom Software Inc (NYSE: PAYC) is a high-quality SaaS name, according to KeyBanc Capital Markets. 

The Analyst

KeyBanc analyst Brent Bracelin upgraded Paycom from Sector Weight to Overweight with a $105 price target, suggesting roughly 25-percent upside from current levels.

The Thesis

Paycom's proven direct sales strategy could sustain 20-percent-plus revenue growth through share gains, irrespective of economic cycles, Bracelin said in a Monday note. (See the analyst's track record here.) 

"We believe longer-term plans to double the footprint to 90 office locations ensures an extended runway to sustain growth," the analyst said. 

KeyBanc views Paycom as a company with a best-in-class efficiency model, with more than 40-percent EBITDA margins. The 2018 guidance at the midpoint for 25-percent growth and 40-percent EBITDA margins appears conservative, Bracelin said. 

Low penetration of a large, $26-billion-plus total addressable market could be positive for Paycom, the analyst said. The SaaS company is gaining the most in mid-market, while  Workday Inc (NASDAQ: WDAY) is gaining the most in large enterprises, even as Automatic Data Processing (NASDAQ: ADP) and Paychex, Inc. (NASDAQ: PAYX) are losing share at the low end, Bracelin said. 

KeyBanc projects little-to-no Affordable Care Act risk through 2019.

Paycom shares, trading at 18 times EV/EBITDA on 2019 estimates, present a favorable risk-reward scenario, the analyst said. 

The Price Action

Paycom shares are up about 62 percent over the past year.

The stock was up 3.51 percent at $87.48 at the time of publication Tuesday morning. 

Related Links:

HubSpot Has Strong Fundamentals, But Upside Is Largely Priced In, Says Morgan Stanley

Morgan Stanley: Veeva Systems' Share Price Fails To Reflect Growth, Margin Potential

Photo courtesy of Paycom. 

Latest Ratings for PAYC

DateFirmActionFromTo
Nov 2020Credit SuisseMaintainsUnderperform
Nov 2020NeedhamMaintainsBuy
Nov 2020Piper SandlerMaintainsOverweight

View More Analyst Ratings for PAYC
View the Latest Analyst Ratings

 

Related Articles (PAYC)

View Comments and Join the Discussion!

Posted-In: Brent Bracelin KeyBanc Capital Markets SAASAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

Latest Ratings

StockFirmActionPT
PMTB of A SecuritiesMaintains18.5
IVRB of A SecuritiesMaintains3.0
EFCB of A SecuritiesMaintains15.5
NYMTB of A SecuritiesMaintains3.5
NLYB of A SecuritiesMaintains8.5
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com