Paycom Software: BMO Capital raises PT to $258, maintains Market Perform rating.

Paycom Software: BMO Capital raises PT to $258, maintains Market Perform rating.

BMO Capital has raised its price target for Paycom Software (PAYC) to $258.00 from $244.00, while maintaining a Market Perform rating on the stock. This decision follows Paycom's strong second-quarter results, which exceeded market expectations. The company reported earnings per share (EPS) of $2.06, surpassing the Zacks Consensus Estimate of $1.78, and revenue of $483.6 million, beating the Zacks Consensus Estimate by 2.46% [1].

Key factors contributing to the price target increase include Paycom's impressive gross profit margins of 86.2%, which generated $384.9 million in free cash flow over the last twelve months. Additionally, the launch of Paycom's AI Search Engine, IWant, is highlighted as a significant initiative. This product will be deployed across all Paycom customers during the current quarter, serving as the foundation for the company's sales and marketing efforts [2].

BMO Capital also noted that Paycom's artificial intelligence ambitions will require capital expenditure in the near term, keeping the firm's free cash flow outlook stable despite increasing revenue and EBITDA projections. The company currently trades at an EV/EBITDA multiple of 23.7x, with a solid financial health score according to InvestingPro analysis [2].

Investors should closely monitor the company's earnings outlook and estimate revisions, as these trends can significantly impact stock performance. While the current consensus EPS estimate for the coming quarter is $1.93 on $488.9 million in revenues, the estimate revisions trend was unfavorable ahead of the earnings release, translating into a Zacks Rank #4 (Sell) for the stock [1].

In conclusion, BMO Capital's price target increase reflects the positive performance and strategic initiatives of Paycom Software. Investors should continue to evaluate the company's future prospects based on its earnings outlook and valuation metrics.

References:
[1] https://sg.finance.yahoo.com/news/paycom-software-payc-beats-q2-212002881.html
[2] https://www.investing.com/news/analyst-ratings/paycom-software-price-target-raised-to-258-from-244-at-bmo-capital-93CH-4176795