Paycom $PAYC

Investment Analysis Clubs Saul’s Investing Discussions
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Paycom Software (PAYC) has also run near the head of that pack, lodging an 88% advance from a November low to a late-June high. It then pulled back into a tight consolidation that held firm support at its 10-week moving average.

Paycom specifically develops cloud-based software for human resources cycles, from recruitment to retirement. It is also used to analyze labor efficiency.

If the stock gets through Friday without rising to a new high, or falling to more than 15% below its June 23 peak, then its consolidation will mature into a flat base with a 73.71 buy point.

That’s a solid position to be in just ahead of its second-quarter earnings report, which is scheduled after the close on Tuesday.

It will be a telling quarter for Paycom, which has seen earnings growth slow from strong triple digits in the first half of last year to a still quite strong 42% jump in Q1. Analysts had forecast a 24% gain, and the stock jumped 5% in powerful trade in response to the beat.

For the second quarter, consensus projections call for a 4% decline in EPS, although revenue growth is expected to hold strong at 30%. If Paycom just meets those targets, it will be its first earnings decline since the first quarter of 2014.

But the bar on expectations is set low, and the Oklahoma City-based outfit has topped views in the past four quarters by margins ranging from 15% to 62%.

The stock had rebounded from support at its 10-week moving average twice since a breakout in February. The stock on Wednesday traded up 39% from that base’s 51.07 buy point.

Among other stocks in the same enterprise software industry group, SAP, Salesforce, Shopify and LogMeIn (LOGM) are also basing. LogMeIn reports Q2 results after the market closes on Thursday. SAP reported July 20. Salesforce has not yet announced a reporting date.

It has taken a nice breather and is completing the base mentioned above. Worth a watch if you don’t own yet.
http://stockcharts.com/freecharts/gallery.html?payc

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Looks like no real move on earnings as Revs beat but outlook inline.

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I don’t understand why PAYC is down big today, can someone explain it to me because it looked like a great quarter out of them.

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Sure, a couple things are happening today. Trump is proposing trade sanctions against China, which has affected BZUN’s stock price and started a rotation out of tech and into industrial and income. Taking advantage of this, the major market movers are selling billions of dollars worth of tech shares and triggering some stop losses in the process. They ride the DOW up a little further, then pick up tech shares for much cheaper than they were yesterday.

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I saw that tech in general is down huge today. But early in the morning when the market was still relatively even PAYC was down 7%, is that due to company specific information or do you still think it was solely due to macro events?

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Just giving the numbers a quick look, I thought EPS growth was fairly slow for a stock with such a high P/E and the EPS growth rate was definitely less than it had been. Haven’t had a chance to go through conference call yet though.

Matt
Long PAYC
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

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i don’t know what is causing the decline

but the forecast for Q3 was for 99-101 vs 77m, or 31% growth for sales
but for EBITDA, 21-23 vs 18.2 a year ago, or 26% on the high end and 15% on the low end

given that the stock trades over 70x earnings and sports a 2.6% gross cash flow yield, maybe that wasn’t good enough, but PAYC seems to be taking share from established players like PAYX or ADP

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I thought EPS growth was fairly slow for a stock with such a high P/E and the EPS growth rate was definitely less than it had been.

I agree, Matt, that the earnings growth slowing with such a high P/E gives me pause. I’ve seen this play out in other stocks in large drops in stock price as the P/E contracts. No guarantee it’s going to happen here, but I’m going to take my 60% increase in 8-9 months and go home (non-taxable acct).

I also never did all that much DD on my own on this stock, just analyzed what others here were saying and happened to get in on the drop to the low 40s. I thank Bear for that!

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I said:

I’m going to take my 60% increase in 8-9 months and go home

I should also say that after many years with the MF, I currently still have a much larger number of stocks than I want to have at this time and am trying to trim them down at a measured rate. So I have no problem taking some of my lower conviction stocks out of my portfolio.

BTW, when I came to this board a couple years ago, I had over 80 stocks, now I’m down to about 60, and want to get it eventually down under 30. I don’t think I could ever get it so concentrated as some here, with just 10-15 max.

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