It has been about a month since the last earnings report for Paycom Software (PAYC Quick QuotePAYC - Free Report) . Shares have added about 1.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Paycom due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Paycom reported mixed results for second-quarter 2020, wherein earnings came in line with the Zacks Consensus Estimate but revenues missed the same.

The company generated revenues of $181.6 million, which increased 7% from the year-earlier period but fell short of the consensus mark of $182.3 million. Paycom Software’s quarterly non-GAAP earnings per share of 62 cents came in line with the Zacks Consensus Estimate. However, the bottom-line figure dropped 17.3% year on year.

The company’s overall performance was mainly impacted by payment deferrals by clients, headcount reductions at client offices and elevated operating expenses.

Margins

Adjusted gross profit increased 6.5% from the year-ago period to $153.8 million. However, adjusted gross margin contracted 60 basis points (bps) on a year-over-year basis to 84.7%.

Paycom Software’s adjusted EBITDA fell 11.8% year over year to $61.2 million. Moreover, adjusted EBITDA margin shrunk 730 bps to 33.7%.

Balance Sheet & Cash Flow

Paycom Software exited the June-end quarter with cash and cash equivalents of $113.5 million compared with the $181.8 million recorded in the prior quarter.

The company’s balance sheet comprises long-term debt of $31.8 million compared with the previous quarter’s $32.2 million.

Cash from operations was $107.5 million in the first half of 2020 and the company repurchased approximately $52 million worth of its common stock.

Guidance

For the third quarter, Paycom Software estimates revenues between $191 million and $193 million. The Zacks Consensus Estimate is pegged at $188.6 million.

Management projects adjusted EBITDA in the range of $56 million to $58 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -24.86% due to these changes.

VGM Scores

At this time, Paycom has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Paycom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.