Paylocity: Underappreciated Durable Growth

Core Viewpoint - Paylocity is demonstrating strong and consistent revenue growth in the human resources software industry, which is often overlooked compared to high-growth AI and semiconductor companies like NVIDIA. The company has a durable growth model supported by a significant portion of recurring revenue and a modern human capital management platform [11][22][23]. Revenue Growth - Paylocity's historical annual year-over-year growth rate is approximately 33%, with the lowest annual growth rate being close to 12% and no negative growth quarters since going public [2][11]. - In the most recent quarter, Paylocity's growth decelerated to about 18%, following a strong post-pandemic growth period [2][11]. Market Position - Paylocity is gaining market share from larger competitors such as ADP and Paychex, as well as from new businesses and in-house solutions [3][23]. - The company has penetrated less than 3% of its addressable market, indicating significant growth potential [2]. Financial Performance - Paylocity's total revenue for the trailing twelve months (TTM) is approximately $1.354 billion, with management guiding for total revenue of about $1.395 billion for fiscal year 2024 [6][28]. - The company has a strong balance sheet with nearly $493 million in cash and short-term investments and no long-term debt [12][28]. Profitability and Margins - Paylocity's adjusted EBITDA margin has improved by roughly 650 basis points since fiscal year 2020, with a target of reaching between 35% and 40% [18][28]. - The company maintains research and development investments at around 11% of revenues, which is viewed positively for keeping its software offerings competitive [17]. Valuation - Paylocity's current EV/Revenues multiple is approximately 5.5x, significantly lower than its historical average and compared to NVIDIA's 37x and AMD's 11x [8][11]. - Analysts estimate a net present value (NPV) of roughly $191 per share for Paylocity, indicating that shares are undervalued by about 30% compared to current trading levels around $143 [9].