Intrinsic value of Paylocity Holding Corporation - PCTY

Previous Close

$104.17

  Intrinsic Value

$104.30

stock screener

  Rating & Target

hold

0%

Previous close

$104.17

 
Intrinsic value

$104.30

 
Up/down potential

0%

 
Rating

hold

We calculate the intrinsic value of PCTY stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 5.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  24.70
  22.73
  20.96
  19.36
  17.93
  16.63
  15.47
  14.42
  13.48
  12.63
  11.87
  11.18
  10.56
  10.01
  9.51
  9.06
  8.65
  8.29
  7.96
  7.66
  7.40
  7.16
  6.94
  6.75
  6.57
  6.41
  6.27
  6.15
  6.03
  5.93
Revenue, $m
  471
  579
  700
  835
  985
  1,149
  1,326
  1,518
  1,722
  1,940
  2,170
  2,413
  2,668
  2,935
  3,214
  3,505
  3,808
  4,123
  4,452
  4,793
  5,147
  5,515
  5,898
  6,296
  6,710
  7,140
  7,588
  8,054
  8,540
  9,046
Variable operating expenses, $m
  416
  509
  615
  733
  864
  1,007
  1,162
  1,328
  1,507
  1,697
  1,893
  2,105
  2,327
  2,560
  2,804
  3,057
  3,322
  3,597
  3,883
  4,181
  4,490
  4,811
  5,145
  5,492
  5,853
  6,229
  6,619
  7,026
  7,450
  7,892
Fixed operating expenses, $m
  30
  30
  31
  32
  32
  33
  34
  35
  35
  36
  37
  38
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  55
  56
Total operating expenses, $m
  446
  539
  646
  765
  896
  1,040
  1,196
  1,363
  1,542
  1,733
  1,930
  2,143
  2,365
  2,599
  2,844
  3,098
  3,364
  3,640
  3,927
  4,226
  4,536
  4,858
  5,193
  5,541
  5,903
  6,280
  6,671
  7,079
  7,505
  7,948
Operating income, $m
  26
  39
  54
  71
  89
  109
  131
  155
  180
  207
  240
  270
  302
  335
  370
  406
  444
  483
  524
  567
  611
  657
  705
  755
  806
  860
  916
  975
  1,036
  1,099
EBITDA, $m
  48
  65
  84
  106
  130
  156
  185
  216
  249
  284
  321
  360
  401
  444
  490
  537
  586
  637
  690
  745
  803
  862
  924
  989
  1,056
  1,126
  1,199
  1,274
  1,353
  1,435
Interest expense (income), $m
  0
  0
  17
  37
  59
  84
  112
  142
  175
  211
  248
  289
  331
  376
  423
  472
  524
  578
  634
  692
  753
  816
  881
  949
  1,020
  1,094
  1,170
  1,250
  1,332
  1,419
  1,508
Earnings before tax, $m
  26
  22
  17
  11
  5
  -3
  -11
  -20
  -30
  -41
  -48
  -61
  -74
  -88
  -102
  -118
  -134
  -150
  -168
  -186
  -205
  -224
  -244
  -265
  -287
  -310
  -333
  -358
  -383
  -409
Tax expense, $m
  7
  6
  5
  3
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  19
  16
  12
  8
  3
  -3
  -11
  -20
  -30
  -41
  -48
  -61
  -74
  -88
  -102
  -118
  -134
  -150
  -168
  -186
  -205
  -224
  -244
  -265
  -287
  -310
  -333
  -358
  -383
  -409

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,878
  2,305
  2,788
  3,328
  3,924
  4,577
  5,285
  6,047
  6,862
  7,729
  8,646
  9,613
  10,629
  11,692
  12,804
  13,963
  15,171
  16,428
  17,735
  19,094
  20,506
  21,973
  23,498
  25,084
  26,732
  28,447
  30,231
  32,089
  34,024
  36,041
Adjusted assets (=assets-cash), $m
  1,878
  2,305
  2,788
  3,328
  3,924
  4,577
  5,285
  6,047
  6,862
  7,729
  8,646
  9,613
  10,629
  11,692
  12,804
  13,963
  15,171
  16,428
  17,735
  19,094
  20,506
  21,973
  23,498
  25,084
  26,732
  28,447
  30,231
  32,089
  34,024
  36,041
Revenue / Adjusted assets
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
  0.251
Average production assets, $m
  88
  108
  130
  155
  183
  214
  247
  282
  320
  361
  404
  449
  496
  546
  598
  652
  708
  767
  828
  891
  957
  1,026
  1,097
  1,171
  1,248
  1,328
  1,411
  1,498
  1,588
  1,683
Working capital, $m
  -38
  -47
  -57
  -68
  -80
  -93
  -107
  -123
  -140
  -157
  -176
  -195
  -216
  -238
  -260
  -284
  -308
  -334
  -361
  -388
  -417
  -447
  -478
  -510
  -543
  -578
  -615
  -652
  -692
  -733
Total debt, $m
  318
  685
  1,100
  1,564
  2,076
  2,637
  3,245
  3,900
  4,600
  5,344
  6,132
  6,963
  7,835
  8,749
  9,704
  10,700
  11,737
  12,817
  13,940
  15,107
  16,320
  17,580
  18,890
  20,252
  21,668
  23,141
  24,674
  26,270
  27,932
  29,664
Total liabilities, $m
  1,613
  1,980
  2,395
  2,858
  3,371
  3,931
  4,540
  5,194
  5,895
  6,639
  7,427
  8,258
  9,130
  10,044
  10,998
  11,994
  13,032
  14,112
  15,235
  16,402
  17,615
  18,875
  20,185
  21,547
  22,963
  24,436
  25,968
  27,564
  29,227
  30,959
Total equity, $m
  265
  325
  393
  469
  553
  645
  745
  853
  968
  1,090
  1,219
  1,355
  1,499
  1,649
  1,805
  1,969
  2,139
  2,316
  2,501
  2,692
  2,891
  3,098
  3,313
  3,537
  3,769
  4,011
  4,263
  4,525
  4,797
  5,082
Total liabilities and equity, $m
  1,878
  2,305
  2,788
  3,327
  3,924
  4,576
  5,285
  6,047
  6,863
  7,729
  8,646
  9,613
  10,629
  11,693
  12,803
  13,963
  15,171
  16,428
  17,736
  19,094
  20,506
  21,973
  23,498
  25,084
  26,732
  28,447
  30,231
  32,089
  34,024
  36,041
Debt-to-equity ratio
  1.200
  2.110
  2.800
  3.330
  3.750
  4.090
  4.350
  4.570
  4.750
  4.900
  5.030
  5.140
  5.230
  5.310
  5.380
  5.430
  5.490
  5.530
  5.570
  5.610
  5.640
  5.670
  5.700
  5.730
  5.750
  5.770
  5.790
  5.810
  5.820
  5.840
Adjusted equity ratio
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141
  0.141

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  19
  16
  12
  8
  3
  -3
  -11
  -20
  -30
  -41
  -48
  -61
  -74
  -88
  -102
  -118
  -134
  -150
  -168
  -186
  -205
  -224
  -244
  -265
  -287
  -310
  -333
  -358
  -383
  -409
Depreciation, amort., depletion, $m
  22
  26
  30
  35
  41
  47
  54
  61
  68
  77
  81
  90
  99
  109
  120
  130
  142
  153
  166
  178
  191
  205
  219
  234
  250
  266
  282
  300
  318
  337
Funds from operations, $m
  41
  42
  43
  44
  44
  44
  43
  40
  38
  35
  32
  29
  25
  21
  17
  13
  8
  3
  -2
  -8
  -13
  -19
  -25
  -31
  -38
  -44
  -51
  -58
  -65
  -73
Change in working capital, $m
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
Cash from operations, $m
  49
  51
  53
  55
  56
  57
  57
  56
  55
  53
  51
  49
  46
  43
  40
  36
  32
  29
  24
  20
  16
  11
  6
  1
  -4
  -9
  -15
  -20
  -26
  -32
Maintenance CAPEX, $m
  -14
  -18
  -22
  -26
  -31
  -37
  -43
  -49
  -56
  -64
  -72
  -81
  -90
  -99
  -109
  -120
  -130
  -142
  -153
  -166
  -178
  -191
  -205
  -219
  -234
  -250
  -266
  -282
  -300
  -318
New CAPEX, $m
  -17
  -20
  -23
  -25
  -28
  -30
  -33
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -52
  -54
  -56
  -59
  -61
  -63
  -66
  -69
  -71
  -74
  -77
  -80
  -83
  -87
  -90
  -94
Cash from investing activities, $m
  -31
  -38
  -45
  -51
  -59
  -67
  -76
  -85
  -94
  -104
  -115
  -126
  -137
  -149
  -161
  -174
  -186
  -201
  -214
  -229
  -244
  -260
  -276
  -293
  -311
  -330
  -349
  -369
  -390
  -412
Free cash flow, $m
  17
  13
  9
  3
  -2
  -10
  -19
  -29
  -40
  -52
  -64
  -77
  -91
  -106
  -121
  -137
  -154
  -172
  -190
  -209
  -229
  -249
  -270
  -292
  -315
  -339
  -364
  -389
  -416
  -444
Issuance/(repayment) of debt, $m
  318
  367
  415
  464
  512
  561
  608
  655
  700
  745
  788
  831
  872
  914
  955
  996
  1,038
  1,080
  1,123
  1,167
  1,213
  1,260
  1,310
  1,362
  1,416
  1,473
  1,533
  1,596
  1,662
  1,733
Issuance/(repurchase) of shares, $m
  33
  44
  56
  68
  81
  95
  111
  128
  145
  163
  178
  197
  217
  238
  259
  281
  304
  328
  352
  377
  404
  431
  459
  489
  520
  552
  585
  620
  656
  694
Cash from financing (excl. dividends), $m  
  351
  411
  471
  532
  593
  656
  719
  783
  845
  908
  966
  1,028
  1,089
  1,152
  1,214
  1,277
  1,342
  1,408
  1,475
  1,544
  1,617
  1,691
  1,769
  1,851
  1,936
  2,025
  2,118
  2,216
  2,318
  2,427
Total cash flow (excl. dividends), $m
  368
  424
  479
  535
  591
  646
  700
  754
  806
  856
  902
  950
  998
  1,046
  1,093
  1,140
  1,187
  1,236
  1,285
  1,336
  1,388
  1,442
  1,499
  1,558
  1,620
  1,685
  1,754
  1,826
  1,902
  1,983
Retained Cash Flow (-), $m
  -52
  -60
  -68
  -76
  -84
  -95
  -111
  -128
  -145
  -163
  -178
  -197
  -217
  -238
  -259
  -281
  -304
  -328
  -352
  -377
  -404
  -431
  -459
  -489
  -520
  -552
  -585
  -620
  -656
  -694
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  317
  364
  411
  459
  507
  551
  589
  626
  660
  693
  724
  753
  781
  808
  833
  859
  883
  908
  933
  958
  984
  1,011
  1,040
  1,069
  1,101
  1,134
  1,169
  1,207
  1,246
  1,289
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  303
  333
  358
  378
  393
  400
  398
  391
  379
  363
  344
  321
  297
  271
  245
  218
  192
  167
  144
  122
  102
  84
  68
  54
  43
  33
  25
  19
  14
  10
Current shareholders' claim on cash, %
  98.5
  96.9
  95.2
  93.6
  92.0
  90.5
  88.9
  87.4
  86.0
  84.5
  83.2
  81.9
  80.6
  79.3
  78.1
  76.9
  75.7
  74.6
  73.5
  72.4
  71.3
  70.3
  69.2
  68.2
  67.2
  66.3
  65.3
  64.4
  63.5
  62.6

Paylocity Holding Corporation is a cloud-based provider of payroll and human capital management (HCM), software solutions for medium-sized organizations. The Company's services are provided in a software-as-a-service delivery model utilizing its cloud-based platform. The cloud-based platform provides a suite of applications using a multi-tenant architecture. The cloud-based platform features a suite of unified payroll and HCM applications. The Company, through cloud-based platform, offers various products, which include Paylocity Web Pay, Paylocity HR, Paylocity Affordable Care Act Enhanced, Paylocity Impressions, Performance Management, Self-Service HR Portals, Paylocity Recruiting, Paylocity Web Time, Paylocity Web Onboarding, and Paylocity Web Benefits and Paylocity Enterprise Benefits, Powered by bswift. The multi-tenant software platform is configurable and includes a unified suite of payroll and HCM applications, such as time and labor tracking, benefits and talent management.

FINANCIAL RATIOS  of  Paylocity Holding Corporation (PCTY)

Valuation Ratios
P/E Ratio 770
Price to Sales 18
Price to Book 36.4
Price to Tangible Book
Price to Cash Flow 86.9
Price to Free Cash Flow 199.6
Growth Rates
Sales Growth Rate 29.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 45.8%
Cap. Spend. - 3 Yr. Gr. Rate 26%
Financial Strength
Quick Ratio NaN
Current Ratio 1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.6%
Ret/ On Assets - 3 Yr. Avg. -0.7%
Return On Total Capital 5.2%
Ret/ On T. Cap. - 3 Yr. Avg. -4.1%
Return On Equity 5.2%
Return On Equity - 3 Yr. Avg. -4.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 58.7%
Gross Margin - 3 Yr. Avg. 56.6%
EBITDA Margin 9.3%
EBITDA Margin - 3 Yr. Avg. 3.5%
Operating Margin 2.3%
Oper. Margin - 3 Yr. Avg. -2.7%
Pre-Tax Margin 2.3%
Pre-Tax Margin - 3 Yr. Avg. -2.8%
Net Profit Margin 2.3%
Net Profit Margin - 3 Yr. Avg. -2.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

PCTY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PCTY stock intrinsic value calculation we used $378 million for the last fiscal year's total revenue generated by Paylocity Holding Corporation. The default revenue input number comes from 0001 income statement of Paylocity Holding Corporation. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PCTY stock valuation model: a) initial revenue growth rate of 24.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for PCTY is calculated based on our internal credit rating of Paylocity Holding Corporation, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Paylocity Holding Corporation.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PCTY stock the variable cost ratio is equal to 88.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $29 million in the base year in the intrinsic value calculation for PCTY stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Paylocity Holding Corporation.

Corporate tax rate of 27% is the nominal tax rate for Paylocity Holding Corporation. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PCTY stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PCTY are equal to 18.6%.

Life of production assets of 3 years is the average useful life of capital assets used in Paylocity Holding Corporation operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PCTY is equal to -8.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $212.824 million for Paylocity Holding Corporation - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 52.887 million for Paylocity Holding Corporation is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Paylocity Holding Corporation at the current share price and the inputted number of shares is $5.5 billion.

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