Paylocity
| CURRENT PRICE | PROBABILITY-WEIGHTED FAIR VALUE | FAIR VALUE RANGE |
|---|---|---|
| $112 | ~$120 | $85 – $145 |
| May 2026 | Bull 25% / Base 50% / Bear 25% | Modest upside; share buyback +$1B |
Verdict: PCTY delivered Q3 FY26 revenue beat ($502M +10.5%) with Adj EBITDA of $220M (43.8% margin)[1]. The board authorized an incremental $1B buyback, bringing total authorization to $1.35B[2]. At 19.6x forward P/E and 21.9x EV/EBITDA, valuation is reasonable for a 10%+ grower with 44% EBITDA margins. The HCM mid-market has structural growth tied to wage inflation and cloud penetration; competitive intensity vs. PAYC, ADP and WDAY remains the swing variable.
CURRENT SNAPSHOT
| Metric | Value | Notes / Source |
|---|---|---|
| Stock price | $112 | [3] |
| Market cap | ~$6B | [4] |
| Q3 FY26 revenue | $502M (+10.5%) | Recurring +11.6% [1] |
| Q3 FY26 EPS | $2.89 | vs cons $2.64 [2] |
| Q3 FY26 Adj EBITDA | $220M (43.8%) | [1] |
| Forward P/E | 19.6x | Trailing 22.8x [4] |
| EV/EBITDA | 21.9x | [4] |
| Buyback authorization | $1.35B | After +$1B addition [2] |
BULL / BASE / BEAR SCENARIOS
| Scenario (weight) | Assumptions | Fair Value |
|---|---|---|
| Bull (25%) | Reaccel to +13%, AI HCM agents drive ARPU, multiple expands to 24x EPS | $145 |
| Base (50%) | Hit consensus, +10% revenue growth, multiple stays 20x forward | $120 |
| Bear (25%) | Customer churn rises, growth slows to +7%, multiple compresses to 15x | $85 |
| Probability-weighted | Solid HCM compounder; buyback supportive; competitive intensity is the wild card. | ~$120 |
Key Risks
- Competition: PAYC, ADP, WDAY, RUN all compete; pricing pressure possible.
- Mid-market labor: Customer payroll counts directly tied to revenue.
- Sales productivity: Direct sales model; rep ramp time and territory coverage matter.
- M&A integration: Past acquisitions (Airbase, etc.) need to deliver synergies.
What Would Change Our View
- Upside: Revenue reacceleration, AI HCM monetization, buyback execution.
- Downside: Customer count loss, ARPU decline, margin compression.
Sources
[1] https://www.sec.gov/Archives/edgar/data/0001591698/000159169826000036/pcty-20260507xex991.htm
[3] https://finance.yahoo.com/quote/PCTY/
[4] https://stockanalysis.com/stocks/pcty/statistics/
Disclaimer
This output is for informational and research-assistance purposes only. It does not constitute investment, legal, tax, accounting, or other professional advice, and it is not a recommendation to buy, sell, or hold any security. Verify material facts independently and consult qualified advisors before making decisions.