3 Payroll Software Vendors Ready to Grow in 2023

Cloud-based payroll and human resource management specialist Paylocity (NASDAQ: PCTY) has lost ground in recent sessions, although it is still a long way from closing the gap of a price jump following its earnings report.

Paylocity offers a suite of products to simplify payroll, automate processes and manage compliance requirements. It also offers products for expense management, pay-on-demand and garnishment solutions. On the HR side, offerings include employee self-service solutions, a document library, a compliance dashboard, and software to track time and attendance data.

The company earned $0.80 per share on revenue of $229 million. These were year-over-year increases of 74% and 37%, respectively.

A quick check of MarketBeat’s earnings data shows that these were significant beats both up and down.

The stock rose 12.72% after the report.

On the earnings conference call, co-CEO Toby Williams cited several reasons for the company’s success in the quarter.

“The ability to attract and retain talent remains a priority for our clients, as the combination of a tight labor market and the challenges of managing remote, on-site and hybrid teams drives increased demand for HR technology. This momentum is reflected in the increase in attach rates across our platform,” he said.

When Williams says “attachment rate,” he’s referring to the rate of customers who purchase add-ons to the base subscription. In the case of Paylocity, this can include learning management, premium video and surveys.

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Williams went on to say, “The demand environment remains strong and our sales teams performed very well in FY22. We saw strong sales execution across our market, driving healthy business activity and setting us up for a solid year 23. Building on this strong momentum, we expanded our sales force for FY23 by adding new sales reps.

Analysts have been encouraged by Paylocity’s strong growth and optimistic outlook for fiscal 2023. Since the earnings report, nine analysts have raised their price target on Paylocity, as you can see using data from MarketBeat analysts.

The consensus analyst rating on the stock is “moderate buy” with a price target of $267.19, which represents an upside of 8.18%.

A monthly chart from Paylocity gives you a great look at the stock’s steady upward trajectory since its IPO in 2014.
3 Payroll Software Vendors Ready to Grow in 2023

Compared to other payroll processors such as Automatic Data Processing (NASDAQ: ADP) and Paychex (NASDAQ:PAYX)that have been public for decades, Paylocity is a relative newcomer.

ADP is up 6.10% this month. Shares also climbed 14.80% in July on the heels of the company’s fiscal fourth quarter earnings report. ADP gained $1.50 per share, topping views by $0.03, according to MarketBeat data. Revenue of $4.13 billion was also above expectations.

ADP’s earnings have accelerated over the past two quarters. During the company’s earnings call, Chief Financial Officer Don McGuire said the “company’s consolidated revenue outlook is for 7% to 9% growth in FY23…”

He added, “we expect adjusted EPS growth of 13% to 16% supported by buyouts…”

These expectations helped propel the stock higher in July and August.
3 Payroll Software Vendors Ready to Grow in 2023

Payment is another well-established payroll company whose stock has also been strong lately.

Morningstar analyst Emma Williams summarized several pros and cons of Paychex.

“We anticipate increased regulatory complexity, tight labor markets and growing adoption of hybrid working will underpin strong demand for Paychex’s suite of offerings supporting higher wallet share and market share gains. “, she wrote. “This includes greater penetration of the payroll and outsourced HR model into the small business market. While we factor in market share gains, we expect growing competition to limit Paychex’s pricing power and force the company to maintain high spending on software development and innovation to remain competitive.

The stock is up 10.90% in the past month and 14.87% in the past three months. Since December, it has repeatedly hit the resistance just below $140. If you see a break above this level, it may be an indication that a new rally may be in the cards.
3 Payroll Software Vendors Ready to Grow in 2023

Companies mentioned in this article

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Before you consider Paylocity, you’ll want to hear this.

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