Last Update 11 Dec 25

PCTY: Beat And Raise Cadence Will Drive Long Term Capital Appreciation

Narrative Update on Paylocity Holding Analyst Price Target

Analysts have modestly fine tuned their price target assumptions for Paylocity Holding, maintaining fair value near $194 per share. Slight adjustments to discount rates and long term growth expectations reflect confidence in the company’s ability to deliver a beat and raise cadence and attractive long term appreciation, despite mixed target revisions across the Street.

Analyst Commentary

Street research on Paylocity reflects a generally constructive stance on long term value creation, with recent target revisions and rating changes pointing to a more balanced risk reward profile as macro and employment data remain mixed.

Bullish Takeaways

Bullish analysts highlight that the stock’s recent underperformance versus the broader software and HCM universe has created an entry point where upside to price targets, such as the recent move to a Buy with upside implied from current levels, looks attractive on a risk adjusted basis.
Several firms point to the company’s consistent ability to set achievable expectations and then deliver modest beats. This is viewed as supporting a potential beat and raise cadence into fiscal 2026 that can justify premium multiples even as growth normalizes.
Positive Q1 execution, including better than expected results and constructive guidance, is cited as evidence that the platform continues to capture share and drive durable revenue growth. This undergirds the view of Paylocity as a long term capital appreciation story.
Some analysts believe that as interest rate expectations moderate and HCM multiples stabilize or expand, Paylocity’s recurring revenue model and exposure to secular trends in payroll, workforce management and HR software can support a valuation rerating over time.

Bearish Takeaways

Bearish analysts emphasize persistent employment headwinds and slowing macro data, which could weigh on headcount based pricing models and constrain near term top line acceleration. This may limit multiple expansion despite solid execution.
The broad AI narrative around labor efficiency and automation is seen as a structural overhang, with some cautioning that if AI meaningfully reduces employee counts, it could pressure long term growth assumptions embedded in current valuation frameworks.
Multiple firms have trimmed price targets, reflecting more conservative discount rate and growth assumptions ahead of upcoming quarters. This signals that even with beats, upside may be more incremental from here.
Channel checks ahead of upcoming earnings are characterized as merely solid rather than stellar, reinforcing a more neutral stance that Paylocity may track in line with peers rather than significantly outperform if macro conditions remain uneven.

What's in the News

Completed a major share repurchase tranche, buying back over 1.15 million shares in Q3 2025 and finishing a $499.64 million program covering about 5.36% of shares outstanding (company buyback update)
Issued fiscal 2026 guidance calling for roughly 10% growth in recurring and other revenue and about 8% total revenue growth year over year, signaling steady but moderating expansion (corporate guidance)
Launched a new integration with Timeero to give field and hourly teams GPS based time, mileage, and break tracking tightly connected to Paylocity payroll and compliance workflows (client announcement)
Added a bi directional integration with Rain to offer earned wage access to Paylocity customers, allowing eligible employees to tap up to 50% of gross earnings before payday with automated payroll reconciliation (client announcement)
Expanded sports and brand partnerships, becoming the Official HCM Partner for the Vegas Golden Knights and New York Islanders, including HR tech deployments and community focused initiatives such as Recycle the Game (client announcements)

Valuation Changes

Fair Value: Unchanged at approximately $194 per share, indicating stable long term valuation assumptions.
Discount Rate: Fallen slightly from about 7.19% to 7.16%, reflecting a modest reduction in perceived risk or funding costs.
Revenue Growth: Effectively unchanged at roughly 9.2% annual growth, signaling stable top line expectations.
Net Profit Margin: Stable at about 18.7%, with no material change to long term profitability assumptions.
Future P/E: Edged down marginally from around 29.89x to 29.87x, implying a slightly lower, but largely consistent, forward multiple.

Enhanced AI-driven HR and finance solutions and open integration tools are strengthening client acquisition, retention, and recurring revenue potential for Paylocity.
Rising regulatory demands and ongoing technology investments are expanding market opportunities and supporting steady margin improvement and long-term earnings growth.
Slowing growth, competitive threats, execution risks with new products, and reliance on volatile interest income could constrain long-term profitability and margin expansion.

Catalysts

About Paylocity Holding

Engages in the provision of cloud-based human capital management and payroll software solutions for workforce in the United States.What are the underlying business or industry changes driving this perspective?

Expansion of Paylocity's unified HR and finance platform, coupled with advanced AI-powered features, is enhancing automation and streamlining complex workflows for clients, positioning the company to capture growing demand from businesses undergoing digital transformation-likely driving higher recurring revenue and average revenue per client over time.
Ongoing integration of third-party solutions (like Airbase) and continued investment in open API capabilities is reinforcing Paylocity's value proposition for distributed and remote workforces, aiding client acquisition and retention, which supports stable or improved revenue retention and long-term earnings visibility.
Increasing regulatory complexity in HR, payroll, and compliance is intensifying the need for automated, up-to-date SaaS platforms across organizations of all sizes, making Paylocity's recurring-revenue business model more attractive and potentially expanding its total addressable market and revenue base.
Strong client retention (92%+) and accelerating cross-sell of new modules (including Paylocity for Finance) are yielding steady margin expansion and improved operating leverage, evidenced by rising adjusted EBITDA margins and free cash flow, which could lead to higher net margins in the future.
Sustained investment in modern technology (AI, automation), scalable sales execution (growing sales force and broker channels), and go-to-market productivity are driving multiyear product differentiation, supporting higher pricing power and predictable revenue growth, which is positioned to positively impact both top-line revenue and bottom-line earnings.

Paylocity Holding Earnings and Revenue Growth

Paylocity Holding Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Paylocity Holding's revenue will grow by 9.6% annually over the next 3 years.
Analysts assume that profit margins will increase from 14.2% today to 18.2% in 3 years time.
Analysts expect earnings to reach $380.9 million (and earnings per share of $6.66) by about September 2028, up from $227.1 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 37.6x on those 2028 earnings, down from 41.8x today. This future PE is greater than the current PE for the US Professional Services industry at 26.3x.
Analysts expect the number of shares outstanding to decline by 1.05% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.02%, as per the Simply Wall St company report.

Paylocity Holding Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Guidance for fiscal 2026 implies slowing revenue and recurring revenue growth (8-9%), marking a deceleration from prior years, which could indicate the company is maturing and may struggle to sustain its historical double-digit growth rates, negatively impacting long-term revenue expansion and valuation multiples.
The recently launched Paylocity for Finance is still in the early adoption stage, with management acknowledging that penetration into the client base will take longer due to the product's higher price point and organizational complexity; this creates execution risk and may delay anticipated increases in average revenue per client or cross-sell uplift, potentially suppressing future revenue and margin growth.
Paylocity continues to face material competition from larger and well-funded players in HCM and payroll (e.g., ADP, Workday, Paycom) as well as emerging fintech and vertical SaaS providers, which can lead to increased pricing pressure, slower market share gains, and compression in net margins and operating leverage over the long term.
Ongoing and significant investment in R&D and sales & marketing (14% and 21% of annual revenue, respectively) are necessary to maintain product differentiation and drive new sales, but if these investments do not translate to sufficient new customer or module adoption, it could result in declining returns on capital and stagnating EBITDA or FCF margins.
With interest income on client funds representing a meaningful contribution to EBITDA and free cash flow, Paylocity's financial performance is exposed to the long-term trend of declining or volatile interest rates; as rates normalize or decline, this headwind could reduce reported margins, cash flows, and net income, diminishing earnings growth in future years.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $220.158 for Paylocity Holding based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $270.0, and the most bearish reporting a price target of just $142.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.1 billion, earnings will come to $380.9 million, and it would be trading on a PE ratio of 37.6x, assuming you use a discount rate of 7.0%.
Given the current share price of $172.04, the analyst price target of $220.16 is 21.9% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

Have other thoughts on Paylocity Holding?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Recurring Revenue Strength And AI Integration Will Drive Long-Term Sector Gains