Paylocity Holding is the IBD Stock Of The Day as the provider of payroll and human resources department software continues to show resilience amid the bear market. PCTY stock rose on Tuesday even as the August JOLTS report showed signs of a cooling labor market.
The relative strength line of Paylocity stock is in record-high territory as it outperforms the S&P 500. While PCTY stock has gained nearly 7% in 2022, the iShares Expanded Tech-Software ETF has plunged 33%. The S&P 500 has retreated about 20.5%.
The relative strength line is the blue line usually scribed just below the stock's price bars on IBD MarketSmith charts. A rising line tells you the stock is outperforming the benchmark S&P 500 index.
PCTY Stock Gaps Up On Earnings Beat
Paylocity stock popped nearly 13% on Aug. 5 on June-quarter earnings and guidance that topped expectations. Profit rose 74% to 80 cents a share while revenue climbed 37% to $229 million.
PCTY stock, though, has given back most of the gains from the fiscal fourth-quarter beat.
Paylocity stock rose 3.6% to close at 252.33 on the stock market today as the Nasdaq composite rallied for the second straight day.
PCTY stock holds a traditional buy point of 276.98 within a consolidation pattern, MarketSmith charts show.
However, aggressive investors may consider an earlier entry of 253.26 as Paylocity stock retakes its 50-day moving average.
Investors should be cautious of any buys amid the bear market and Fed rate hikes.
Payroll Stocks Outperform Most Software
As U.S. businesses rebounded from the Covid pandemic, payroll stocks have outperformed most software companies this year.
Schaumburg, Ill.-based Paylocity targets midsize companies. One rival software maker is Paycor.
Both companies have taken customers away from service bureaus Automatic Data Processing and Paychex, analysts say.
The IBD Computer Software-Enterprise group ranks No. 75 out of 197 groups tracked. PCTY stock holds a Composite Rating of 95 out of a best-possible 99.
Paycom Software has a CR rating of 92, while Paycor's is 83.
JOLTS Report Softer Than Expected
On Tuesday, the Labor Department's Job Openings and Labor Turnover Survey, or JOLTS, came in much softer than expected. U.S. job openings sank by over 1 million to 10.1 million in August. In addition, job openings plummeted in August by the most since early in the pandemic.
At BMO Capital Markets, analyst Daniel Jester says Paylocity is well-positioned even if the economy cools.
"Our conversations with investors continue to weigh the risk of U.S. recession and resulting employment headwind against signs of continued solid demand as employers invest in modernization and automation of the back office amid a still tight labor market," he wrote in a recent report.
Jester added: "For Paylocity specifically, the ability to offer both a reasonable return-on-investment story and differentiated tools addressing employee engagement is a solid combination in the current environment."
Further, Paylocity stock holds a middling Accumulation/Distribution Rating of C-minus.
The rating analyzes price and volume changes in a stock over the past 13 weeks of trading. The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
Elevate Customer Conference
Paylocity's distribution partners include more than 30,000 benefits administrators, 401(k) advisors, insurance brokers and human resources consultants.
Paylocity hosted its Elevate customer conference in September. The event was virtual on the internet, not in-person.
Paylocity management highlighted product innovation in mobile apps and other areas at the event, Truist Securities analyst Terry Tillman said in a report.
"We are incrementally confident in the company handily surpassing the $1 billion annual revenue milestone while generating adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin approaching 30% in the current fiscal year," Tillman said.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
