IBD’s enterprise software group has been serving up high-quality names for some time now. Friday’s Stock Spotlight screen confirmed it.
Callidus Software (CALD), Paylocity (PCTY) and Paycom Software (PAYC) made the cut. All three are similar in that they boast outstanding fundamentals, strong growth prospects and generally healthy charts.
Callidus is a cloud software play operating in the sales performance management space. It helps customers identify sound leads and streamline sales compensation.
Paylocity…is a cloud-based provider of payroll and human capital management software for medium-sized businesses.
Paycom operates in the same market as Paylocity. It has market cap of $2.6 billion and is the most liquid of the three with an average daily dollar volume of around $32 million. It’s an IBD Sector Leader and also a member of the IBD 50 index of leading growth stocks.
Paycom boasts a five-year annualized earnings growth rate of 90% and sales growth rate of 40%. In its latest fiscal year, annual pretax margin and return on equity hit all-time highs at 16.6% and 27.2%, respectively. Profit growth in the first quarter accelerated to 175%; sales grew 63% to $90.1 million, up from a 48% rise in Q4 2015. Paycom is still in buy range after recently reclaiming a 42.70 cup-with-handle buy point.
CALD: Full-year earnings this year are seen rising 40% this year and 39% in 2017.
PAYC is #1 in its group, CALD#6 and PCTY is #9. The only real knock against PAYC is that there was a 7% drop in funds holding the stock last quarter. We would prefer the big boys are buying in, not easing out.