Why Paycom Software, Inc Stock Is Soaring Today

What happened

Shares ofPaycom Software, Inc(NYSE: PAYC), a provider of cloud-based software used for payroll processing and other humanresources functions, are up 12% as of 10:45 a.m. EST on Thursday.

So what

Thursday's surging stock price can be traced to the release of a better-than-expected earnings report that was full of good news.

Image source: Getty Images.

Here's a look at Paycom's quarterly results when compared to the year-ago period:


Q4 2016

Q4 2015

Year-Over-Year Change


$87.8 million

$65.1 million


Adjusted EBITDA

$20.7 million

$10.5 million


Non-GAAP net income

$10.8 million

$6.0 million






Data source: Paycom Software.

These figures compared quite favorably to management's guidance range of $85 million to $87 million in revenue and $14 million to $16 million in adjusted EBITDA. They also handily bested Wall Street'sexpectation of $86.2 million in revenue and $0.15 in EPS.

Paycom's management team also expects the good times to continue heading into the first quarter of 2017. The company is guiding for revenue toland between $114.5 million and $116.5 million for the first quarter. The midpoint of this range represents growth of 28% over the year-ago quarter. Adjusted EBITDA is expected to also outpace revenue growth yet again, and land between $42 million and $44 million.

The picture is looking equally bright for the full year ahead. Paycom is projecting total revenue to increase 29% to a range of $422 million to $424 million and for anadjusted EBITDA to grow by 21% to a range of $113 million to $115 million.

The better-then-expected quarterly results and upbeat forecast caused investors to cheer.

Now what

Paycom's fourth-quarter results clearly show that the company is successfullywinning market share away from legacy providers such as Paychex and ADP. This hints that the company's strategy to focus on small and medium-sizedbusinesses is really paying off.

CEO Chad Richinson was quite happy with the company's performance in 2016, and he boasted that Paycom now counts more than17,800 clients on its platform. Better yet, the company's retention rates for 2016 stood at 91%, which show how much value its customers get from using the company's platform.

All in all, Paycom looks well-positioned to grow its top and bottom lines in the years ahead. With so much good news packed into this report, it's easy to understand why investors are bidding up shares today.

10 stocks we like better than Paycom SoftwareWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Paycom Software wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 6, 2017

Brian Feroldi owns shares of Paycom Software. The Motley Fool owns shares of and recommends Paycom Software. The Motley Fool recommends Automatic Data Processing. The Motley Fool has a disclosure policy.