Stock Review of the Day
Stock: PCTY (Paylocity)
Summary: ON SALE
Share Price: $162
Sticker Price: $45,201
PCTY is a cloud-based payroll and human resources software company. They were founded in 1997 and are based out of Schaumburg, IL. PCTY was one of the 5,000 fastest growing private companies according to Inc. Magazine in 2003, 2004, and from 2007 to 2014. They were also listed in Glassdoor’s Best Places to Work in 2019.
Over the last few weeks, the majority of stocks have faced increased volatility. In fact, the Nasdaq (primarily composed of tech stocks) is down about 8% but this isn’t true for PCTY as they reached an all time high of $165 this week.
Why is this?
Here are a few reasons why you should pay close attention to PCTY, aside from the obvious score and MOS listed above.
1) They just launched a new touchless time clock with thermal scanning. Click Here to learn more. Generally, employee time clocks are the most shared device by any organization which doesn’t exactly play nice with health conditions today. This new thermal scanning device can scan your body temperature and recognize employees even while they wear a mask.
This is a game changer and definitely ahead of the trend. The more tech we can release that does NOT require our hands, the better.
2) They introduced a new video feature that allows employees to easily record and send videos to other employees, complete survey’s, and manage recruiting and onboarding.
It sounds like PCTY is empowering companies to shift away from long-winded emails and move towards quick video snippets. I don’t know about you, but I would much rather watch a 15 – 30 second video rather then read a 5 paragraph email.
3) They maintain relatively low debt. Currently, PCTY has $100M in debt but prior to this most recent year, they had $0 in debt for almost 5 consecutive years.
I did some homework on why PCTY accumulated this most recent debt and I can’t find an exact answer but my assumption is they are allocating debt to technical innovations such as the touchless clocks and video features listed above. In this case, the debt allocation is smart. Although the debt is $100M, they currently have about $65M in cash. This is a good sign because they could use that cash to pay down a considerable amount of debt if they wanted.
4) They are classified as an enterprise SaaS. I’ve talked about this in the past. Enterprise means they serve large corporations. SaaS is Software as a Services which is a monthly or annual recurring revenue model. When it comes to enterprise SaaS, large corporations typically sign contracts that extend over years. Usually between 3 – 10 years. The annual cost can range between hundreds of thousands on up to millions of dollars per year for just one corporate customer. Overall, enterprise SaaS is highly profitable and scalable.
5) They are essential. As long as corporations have employees, they will need software that handles payroll, workforce management, HR, Benefits, employee engagement, and more. PCTY checks all those boxes in one platform. PCTY is highly in demand and will remain in demand for the foreseeable future.
I love stocks like PCTY because they are high performers and not yet popular mainstream stocks like Facebook, Amazon, Apple, Netflix, and Google.
A major benefit of TYKR is it finds great stocks before they become mainstream news.
Here are a few examples of stocks before they became wildly popular…
Imagine buying Amazon for $125 in 2010. Today Amazon is over $3,000.
Imagine buying Facebook for $25 in 2013. Today Facebook is over $260.
Imagine buying Netflix for $60 in 2014. Today Netflix is over $493.
With a score of 13/20, the financials are strong but the impressive data point is the MOS of 99%. With a Share Price of $162 vs a Sticker Price of $45,201, this stock has a lot of room to grow.
What do you think?
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All stock reviews are for entertainment purposes only. Reviews are not financial advice.
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