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Paylocity (PCTY)
NASDAQ:PCTY
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Paylocity (PCTY) AI Stock Analysis

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PCTY

Paylocity

(NASDAQ:PCTY)

Rating:75Outperform
Price Target:
$202.00
▲(15.83% Upside)
Paylocity's strong financial performance and strategic corporate actions, such as the share buyback program, are significant strengths. However, technical indicators suggest potential short-term weakness, and the high P/E ratio raises valuation concerns. The earnings call provided a balanced view with strong growth but highlighted some risks, such as interest rate impacts and reliance on the broker channel.
Positive Factors
Financial performance
Paylocity reported strong fourth-quarter results that outperformed consensus on all key metrics.
Product demand
The release of Paylocity for Finance is seeing nice early demand signals from customers.
Negative Factors
Labor market conditions
The expected deterioration in labor market indicators may negatively affect demand and limit upside potential for Paylocity.
Revenue growth
The anticipated recurring revenue growth rate is slightly lowered and does not meet the 'normal' market level expectations for FY26.

Paylocity (PCTY) vs. SPDR S&P 500 ETF (SPY)

Paylocity Business Overview & Revenue Model

Company DescriptionPaylocity (PCTY) is a leading provider of cloud-based payroll and human capital management (HCM) solutions for medium-sized businesses in the United States. Founded in 1997, the company offers a comprehensive suite of services, including payroll processing, talent management, benefits administration, and time and attendance tracking. Paylocity's platform is designed to streamline HR processes, enhance employee engagement, and provide businesses with valuable data insights, thereby improving overall workforce management.
How the Company Makes MoneyPaylocity generates revenue primarily through subscription fees for its software-as-a-service (SaaS) offerings. The company has a diverse range of revenue streams, including payroll processing fees, HCM software subscriptions, and additional services such as employee benefits management and time and attendance tracking. Paylocity's pricing model typically involves a recurring subscription charged on a per-employee basis, which provides a steady stream of income as businesses scale. Additionally, the company may earn revenue from upselling premium features and services to existing clients. Strategic partnerships with various organizations in the HR technology ecosystem also contribute to its revenue, enhancing its service offerings and expanding its market reach.

Paylocity Earnings Call Summary

Earnings Call Date:Aug 05, 2025
(Q4-2025)
|
% Change Since: |
Next Earnings Date:Oct 30, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong revenue growth, successful product expansion, and increased client and sales force growth, with recognition for their workplace environment. However, concerns over interest rate impacts and increased sales and marketing expenses were noted. The broker channel dependency was also highlighted as a potential risk.
Q4-2025 Updates
Positive Updates
Recurring and Total Revenue Growth
Paylocity achieved recurring revenue growth of 14% and total revenue growth of 12% in Q4. For fiscal year '25, recurring revenue grew 15% and total revenue grew 14%, ending the year with $1.6 billion in revenue.
Product Expansion and Launch
Paylocity launched 'Paylocity for Finance,' integrating HR and finance functions into a single platform. This includes features like headcount planning, expense management, and AP automation.
Sales and Client Growth
Sales force expanded by 8% to 952 reps, with benefit brokers contributing more than 25% of new business. The client base grew by 7% to 41,650, and average revenue per client increased by 8% from fiscal '24.
Financial Performance and Free Cash Flow
Adjusted EBITDA for fiscal '25 was $583 million, a 15% increase, with a free cash flow margin of 21.5%, representing a 12% dollar increase from fiscal '24.
Recognition and Awards
Paylocity received a TrustRadius top-rated award in HR management software for the third consecutive year and was named by Newsweek as one of America's Greatest Workplaces for Gen Z.
Negative Updates
Interest Rate Impact
The financial guidance assumes 4 rate cuts during fiscal '26, impacting interest income on client-held funds.
Higher Sales and Marketing Expenses
Sales and marketing expenses saw a significant increase in Q4 due to bonus payments and hiring, affecting overall cost structure.
Dependency on Broker Channel
Despite strong growth from the broker channel, there remains a dependency on this channel for over 25% of new business, which could pose a risk if market dynamics change.
Company Guidance
During the fourth quarter of fiscal year 2025, Paylocity delivered strong financial results, with recurring revenue growing 14% and total revenue increasing by 12%, reaching $1.6 billion for the year. The average revenue per client rose by approximately 8% to over $35,300. The company achieved a revenue retention rate of over 92% and expanded its client base by 7% to 41,650. Adjusted EBITDA for the quarter stood at $130.7 million, marking a 32.6% margin, while the fiscal year adjusted EBITDA was $583 million, reflecting a 36.5% margin. The company continues to invest heavily in research and development, with total R&D investments accounting for 14.3% of revenue. Free cash flow margin improved to 21.5%, and Paylocity repurchased approximately 800,000 shares for $150 million during the year. Heading into fiscal 2026, Paylocity forecasts recurring revenue growth between 9% and 12%, with total revenue projected to grow by 8%.

Paylocity Financial Statement Overview

Summary
Paylocity exhibits strong financial health with consistent revenue and profit growth, effective cost management, and a solid balance sheet. The company has successfully reduced its leverage while maintaining robust returns on equity. Cash flow generation is strong, supporting its growth trajectory. Potential risks include fluctuations in EBIT margins and asset management, which should be monitored to sustain long-term financial stability.
Income Statement
85
Very Positive
Paylocity has demonstrated consistent revenue growth over the years, with a notable increase from $561 million in 2020 to $1.6 billion in 2025. The gross profit margin has remained stable around 68%, indicating strong cost management. The net profit margin has improved from 11.5% in 2020 to 14.2% in 2025, reflecting enhanced profitability. However, the EBIT margin showed a decline in 2025, which could indicate increased operational costs or investments.
Balance Sheet
78
Positive
The company's debt-to-equity ratio has decreased significantly from 0.44 in 2020 to 0.17 in 2025, indicating reduced leverage and a stronger equity position. Return on equity has remained robust, averaging around 18% in recent years, showcasing effective utilization of shareholder funds. The equity ratio is healthy, suggesting a solid financial structure, although the total assets have fluctuated, which may require monitoring.
Cash Flow
82
Very Positive
Paylocity's operating cash flow has shown a positive trend, increasing from $112 million in 2020 to $418 million in 2025. The free cash flow growth rate has been strong, particularly in recent years, indicating efficient cash management. The operating cash flow to net income ratio is nearly 2, suggesting strong cash generation relative to earnings. However, the free cash flow to net income ratio has slightly decreased, which could imply increased capital expenditures.
BreakdownTTMDec 2025Dec 2024Dec 2023Dec 2022Dec 2021
Income Statement
Total Revenue1.51B1.60B1.40B1.17B852.65M635.63M
Gross Profit1.03B1.10B960.79M807.56M565.65M416.33M
EBITDA371.58M403.66M336.52M215.89M134.81M101.02M
Net Income212.28M227.13M206.77M140.82M90.78M70.82M
Balance Sheet
Total Assets5.17B4.39B4.25B3.70B4.81B2.41B
Cash, Cash Equivalents and Short-Term Investments477.79M398.07M401.81M288.77M139.76M206.74M
Total Debt301.02M217.89M54.45M70.27M77.52M74.75M
Total Liabilities3.96B3.16B3.21B2.85B4.20B1.94B
Stockholders Equity1.21B1.23B1.03B842.86M613.46M476.93M
Cash Flow
Free Cash Flow381.34M342.75M305.92M215.81M102.47M86.80M
Operating Cash Flow411.52M418.23M384.67M282.72M155.05M124.85M
Investing Cash Flow-354.02M-455.55M-101.89M-220.16M-479.77M48.42M
Financing Cash Flow-242.31M-325.82M141.58M-1.43B2.17B280.48M

Paylocity Technical Analysis

Technical Analysis Sentiment
Negative
Last Price174.40
Price Trends
50DMA
180.78
Negative
100DMA
184.95
Negative
200DMA
192.00
Negative
Market Momentum
MACD
-1.52
Positive
RSI
43.63
Neutral
STOCH
24.25
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PCTY, the sentiment is Negative. The current price of 174.4 is below the 20-day moving average (MA) of 176.52, below the 50-day MA of 180.78, and below the 200-day MA of 192.00, indicating a bearish trend. The MACD of -1.52 indicates Positive momentum. The RSI at 43.63 is Neutral, neither overbought nor oversold. The STOCH value of 24.25 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PCTY.

Paylocity Risk Analysis

Paylocity disclosed 29 risk factors in its most recent earnings report. Paylocity reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Paylocity Peers Comparison

Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
78
Outperform
$12.99B29.9525.76%0.67%10.21%-10.56%
76
Outperform
$10.98B229.081.89%13.46%2.06%
75
Outperform
$9.68B43.7120.04%13.74%10.99%
71
Outperform
$9.21B46.5441.55%0.14%12.47%65.19%
68
Neutral
$9.00B192.75-9.65%17.42%-228.98%
61
Neutral
$35.52B8.84-11.06%1.87%8.55%-8.14%
54
Neutral
$9.10B-37.28%26.45%-74.34%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
PCTY
Paylocity
174.40
17.87
11.42%
PEGA
Pegasystems
55.51
22.41
67.70%
PAYC
Paycom
224.12
61.35
37.69%
DAY
Dayforce Inc
69.00
12.19
21.46%
ESTC
Elastic
86.71
15.61
21.95%
TTAN
ServiceTitan, Inc. Class A
113.99
13.99
13.99%

Paylocity Corporate Events

Stock BuybackBusiness Operations and StrategyFinancial Disclosures
Paylocity Expands Share Buyback Program by $500 Million
Positive
Aug 5, 2025

On August 5, 2025, Paylocity announced a $500 million increase to its share repurchase program, adding to the $200 million remaining from previous authorizations. This move, alongside the launch of Paylocity for Finance, aims to enhance its market position by integrating HR and finance functions, driving efficiency and user experience. The company reported strong financial results for fiscal year 2025, with a 14% increase in total revenue and a 15% rise in recurring revenue year-over-year. Paylocity also repurchased 800,000 shares for $150 million during the fiscal year, reflecting its commitment to returning capital to shareholders.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Aug 30, 2025