Paylocity Stock Continues to Grow on High Demand
The advent of cloud computing has changed the current business landscape completely. The trend has been on the rise as organizations discover the many benefits of using software services and applications through the Internet as compared to having all the facilities in-house.
The field of human resource management, which is largely considered to be a non-innovative field, has not been left untouched by the cloud. Certain companies are making the most of this shift, and investors stand to gain handsome returns from their stocks.
One such case is Paylocity Holding Corp (NASDAQ:PCTY), a provider of cloud-based payroll and human capital management (HCM) software solutions.
Paylocity builds software for medium-sized organizations. And right now, the continued demand for its products, as the tax and regulatory environment in the U.S. gets more complex and dynamic, has been pushing PCTY stock higher.
The company has provided payroll and HCM software solutions to approximately 16,700 clients across the U.S., which on average had over 100 employees. And the list continues to grow. As a result, Paylocity stock stands to go higher as the company’s market opportunities expand.
According to a report by MarketsandMarkets Research Private Ltd., the HCM market size is expected to grow from $14.5 billion in 2017 to $22.5 billion by 2022. This would translate into a compound annual growth rate of 9.2%. (Source: “Human Capital Management Market worth 22.51 Billion USD by 2022,” MarketsandMarkets, June 30, 2017)
The investment in cloud-based software will likely increase because companies stand to gain substantially through HCM solutions. Paylocity is well positioned to benefit from this market growth.
In addition, the workplace environment itself is rapidly changing. Cloud computing and the related software as a service (SaaS) products have become essential as more employees work remotely from home.
Strong Growth in PCTY Stock
Paylocity Holding Corp has been growing its revenue strongly over the past few fiscal years, as the following table shows:
(Source: “Annual Reports And Proxies,” Paylocity Holding Corp, last accessed February 26, 2019.)
Paylocity has the opportunity to keep growing its business over the long term, given the strength of its product portfolio and client relationships.
Earlier this month, the company announced second-quarter results for fiscal-year 2019. Total revenue came in at $107.2 million, which is an increase of 26% over the year.
Total recurring revenue was $104.7 million, which represented 98% of total revenue and an increase of 26% year-over-year. (Source: “Paylocity announces Second Quarter Fiscal Year 2019 Financial Results,” Paylocity Holding Corp, February 6, 2019)
PCTY stock was trading around $50.52 when I wrote about it in January 2018, and it has gained about 72% since then. Over the last year, the stock gained about 85%—and it’s still going strong. The following chart shows this impressive growth.
Chart courtesy of StockCharts.com
Companies and other organizations are making the transition to SaaS solutions for their human resource management needs because they are easier and cheaper to implement than traditional software. Paylocity Holding Corp is a strong player in this growing market.
Investors who wish to gain from the cloud computing trend might not want to overlook PCTY stock for the long term.