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Paylocity Holding Corp PCTY

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Morningstar’s Analysis

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Economic Moat

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Paylocity Onboards Its Way to a Strong Second Quarter; Raise FVE to $163; Shares Overvalued

Brian Colello, CPA Sector Director

Analyst Note

| Brian Colello, CPA |

Narrow-moat Paylocity Holding reported impressive second-quarter results, beating FactSet consensus estimates both on a top- and bottom-line basis. As the headwinds brought on by the COVID-19 pandemic gradually moderate, Paylocity remains well-positioned to take advantage of the expected macroeconomic normalization. Like the previous quarter, 25% of the firm's new sales resulted from channel referrals. Paylocity's focus has been on businesses with between 10 and 1,000 employees. While these businesses were often the most impacted by pandemic-induced business slowdowns, we think that with a large target market of more than 1 million companies, Paylocity has a strong growth runway ahead. With the firm's impressive quarter, strong guidance, and a change in our view of the firm's long-term profitability and cost management, we are raising Paylocity's fair value estimate to $163 from $111 per share. With shares trading close to $213 per share, we would recommend investors wait for a pullback before committing capital to the name.

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Company Profile

Business Description

Paylocity is a fast-growing provider of cloud-based human capital management applications. Now with more than 20,000 customers, the firm targets small and midsize businesses in the United States. Its suite is delivered via the web and focuses on payroll but also includes features for time and labor management, talent management, and human resources management.

Contact
1400 American Lane
Schaumburg, IL, 60173
T +1 847 463-3200
Sector Technology
Industry Software - Application
Most Recent Earnings Dec 31, 2020
Fiscal Year End Jun 30, 2021
Stock Type Aggressive Growth
Employees 3,600