Paylocity Holding Corporation Common Stock (PCTY)

FairStock Score: 63/100 — STEADY

Key Financials

Strengths

• Generates $375 million in annual free cash flow (7.0% yield on market cap)
• High return on equity of 21.0% demonstrating efficient capital deployment
• Conservative balance sheet with debt-to-equity of just 0.12, providing financial flexibility

Concerns

• Trades significantly above Graham Number ($44) with negative 123% margin of safety—limited downside protection
• Altman Z-Score of 0.9 places it in the financial distress zone—elevated bankruptcy risk

AI Analysis

Paylocity Holding Corporation Common Stock is a small-cap technology company valued at $5.4 billion. The business generates $1.7 billion in annual revenue with a 3.0% net margin and $375 million in free cash flow. From a quality standpoint, Paylocity shows distressed Altman Z-Score of 0.9 warrants caution and strong 21% ROE. On valuation, the stock is reasonably priced at 23.6x earnings, with trades far above its Graham Number ($44) with no margin of safety. Growth dynamics show revenue growing at 10.4% and profit growth of 34.0%. Our composite FairStock Score of 63/100 reflects above-average fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

Improving fundamentals and sector tailwinds could drive meaningful earnings growth, compressing the effective multiple for patient investors. With $375 million in annual free cash flow (7.0% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

Macro headwinds or sector-specific disruption could pressure margins, particularly if competitive intensity increases in the technology space. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer