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On Tuesday, TD Cowen updated its financial projections for Paycom Software (NYSE:PAYC), a $12.5 billion market cap company currently trading at $223.67, leading to a revised price target. Analyst Jared Levine increased the target to $242.00 from the previous $230.00 while maintaining a Hold rating on the stock. The adjustment comes as a response to the latest federal funds rate expectations and in anticipation of Paycom’s first-quarter earnings report, scheduled for May 6, 2025.
Levine noted a slight decrease in the fiscal year 2026 estimates, primarily due to anticipated reductions in float revenue and interest income. The analyst also highlighted an improved outlook for revenue growth excluding float, which has prompted an increase in out-year revenue estimates. This aligns with the company’s current revenue growth of 11.19% and impressive gross profit margin of 85.8%, according to InvestingPro data. Despite these changes, Levine expects only minor adjustments to the company’s margin projections.
The new revenue growth model for Paycom excludes float growth rates of 9.3%, 10.7%, and 10.1% for fiscal years 2025, 2026, and 2027, respectively. Alongside these figures, Levine predicts free cash flow (FCF) margins of 19.5%, 20.4%, and 21.4% for the same periods. The revised price target of $242 is based on a 29 times multiple of the estimated calendar year 2026 enterprise value to free cash flow (EV/FCF).
Paycom Software, a leading provider of comprehensive, cloud-based human capital management software, has not yet released its first-quarter earnings. The financial community will be watching closely to see if the company’s performance aligns with TD Cowen’s projections and justifies the updated price target. According to InvestingPro analysis, the stock appears undervalued compared to its Fair Value, with additional insights revealing 10+ more ProTips available for subscribers. As of now, Paycom’s stock rating remains at Hold, indicating that while expectations for growth are positive, the investment firm advises caution until further financial details emerge. For a comprehensive analysis of Paycom’s valuation and growth prospects, investors can access the detailed Pro Research Report, available exclusively on InvestingPro.
In other recent news, Paycom Software reported strong fourth-quarter financial results, exceeding Wall Street expectations with an earnings per share (EPS) of $2.32 and revenue of $493.8 million. This performance was supported by effective execution, organic sales growth, and gains in operational efficiency. Piper Sandler responded by raising its price target for Paycom to $224, although it maintained a Neutral rating, citing cautiousness due to the company’s revenue growth projections. KeyBanc also reaffirmed its Sector Weight rating post-earnings, highlighting Paycom’s revenue and EBITDA beats, but noted the initial revenue guidance for 2025 fell short of expectations.
Additionally, KeyBanc upgraded Paycom’s stock rating to Overweight, setting a new price target of $245, following a meeting with the company’s new CFO, Bob Foster. This upgrade was based on potential top-line growth, international expansion opportunities, and improved EBITDA margins. Needham maintained a Hold rating on Paycom, acknowledging the company’s robust fourth-quarter earnings and a consistent gross revenue retention rate of 90%. Despite some discrepancies in revenue guidance, analysts expressed optimism about Paycom’s strategic initiatives and automation efforts, which are expected to enhance client engagement and operational efficiency.
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