Why Paycom Stock Is Skyrocketing Today

Paycom Software (NYSE: PAYC) stock is surging in Thursday's trading following the company's recently published third-quarter results. The company's share price was up 24.7% as of 2:15 p.m. ET.

Paycom published its Q3 results after the market closed yesterday, and sales and earnings for the period beat Wall Street's targets. In addition to the Q3 beats, the company also issued strong guidance for the current quarter.

Paycom beats top- and bottom-line expectations in Q3

Paycom posted non-GAAP (adjusted) earnings per share $1.67 on revenue of $451.9 million in the third quarter. Sales in the period were up roughly 11.2% year over year, while earnings per share were down roughly 5.2%. The results came in ahead of the average analyst estimate's call for adjusted earnings per share of $1.61 on revenue of $447.2 million.

Paycom's guidance came in much better than expected

For the fourth quarter, Paycom is guiding for sales between $477 million and $484 million. Hitting the midpoint of that range would mean delivering year-over-year growth of 10.6% and sequential quarterly sales growth of 6.3%. The guidance came in significantly ahead of the average analyst estimate, which had called for sales of $462.4 million in the period. Meanwhile, management expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to be between $184.5 million and $191.5 million.

For the full-year period, management is targeting sales between $1.866 billion and $1.873 billion -- suggesting growth of 10.4% at the midpoint. Adjusted EBITDA is projected to be between $745 million and $752 million, suggesting annual growth of 4.1% at the midpoint of the guidance range.

Paycom's business has posted uneven performance over the last year, but it looks like growth has started to accelerate again. Unfavorable macroeconomic shifts remain a risk factor for the company and its stock, but it looks like the business may be emerging from some of the headwinds created by product cannibalization.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Paycom Software. The Motley Fool has a disclosure policy.