Paycom Software Inc. (NYSE:PAYC) is trading at $285. Analysts generally project that the stock will gain, potentially by more than 100%. The most conservative analysts have projected gains up to $330. We think that investors should exercise caution.
Paycom Software is rated low on the three main investing styles which are value, growth, and momentum. The PE is extremely high at 53.22. In complete disregard of these red flags, some analysts have labeled Paycom a strong buy. That is because the earnings are projected to grow by 25%.
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Our analysis considers that the state of the market is unlikely to support the gains that analysts have insinuated. The price is also unlikely to happen even if the company records the projected growth in earnings. The company’s follow-through index indicates just a 30% chance that the stock would gain on good earnings. The follow-through gains would hardly exceed 30%. Besides, the next earnings release is in August. It means that stock declines could continue.
Source – TradingView
The price chart shows that Paycom stock has been bleeding. The 10-day MA just touched the 200-day MA. While the price may pivot at the current point, the stock is subdued by bear market controls. The price appears to be consolidating at the current levels. Our analysis finds that investors should watch the price movements for a little longer.
Paycom Software is projected to grow earnings by as much as 25%. Based on that, some analysts have projected as much as 100% gains. We think that is overly-optimistic, and the earnings data is still months away.
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