It has been about a month since the last earnings report for Paycom Software (PAYC Quick QuotePAYC - Free Report) . Shares have lost about 14.7% in that time frame, underperforming the S&P 500.

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

Paycom Q4 Earnings & Revenues Beat Estimates, Up Y/Y

Paycom Software reported better-than-anticipated fourth-quarter 2021 results, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate.

The online payroll and human resource technology provider reported non-GAAP earnings of $1.11 per share, beating the Zacks Consensus Estimate of $1.08 per share. The bottom line improved 32.1% from 84 cents per share reported in the year-ago quarter.

For the fourth quarter of 2021, the company reported revenues of $285 million, beating the consensus mark of $275.8 million and improving 29% year over year. This year-over-year upside was primarily driven by the new client additions and continued focus on cross-selling to the existing clients.

Quarter in Detail

Paycom’s recurring revenues (representing 98.3% of total revenues) improved 29.2% to $280 million in the fourth quarter.

The adjusted gross profit climbed 26.8% from the year-ago period to $239.7 million. However, the adjusted gross margin contracted 140 basis points (bps) on a year-on-year basis to 84.1%, primarily on the workforce returning to offices and aggressive hiring.

Paycom’s adjusted EBITDA increased 30.2% year over year to $109.6 million. Adjusted EBITDA margin expanded 30 bps to 38.4%.

Balance Sheet & Cash Flow

Paycom exited the fourth quarter with cash and cash equivalents of $278 million compared with $230.9 million recorded in the previous quarter.

The company’s balance sheet comprises net long-term debt of $29.2 million compared with the previous quarter’s $27.8 million.

During the full-year 2021, it generated an operating cash flow of $319.4 million.

Full-Year Highlights

Paycom reported revenues of $1.06 billion in full-year 2021, up 25.4% year over year. Recurring revenues grew 25.5% to $1.04 billion.

Non-GAAP diluted earnings were $4.48 per share, indicating a surge of 28.4% year over year.

For the full-year 2021, adjusted EBITDA (accounting for 39.7% of revenues) increased 26.8% year over year to $419.3 million. Adjusted EBITDA margin expanded 40 bps to 39.7%.

Guidance

Paycom forecast 2022 revenues between $1.314 billion and $1.316 billion. The adjusted EBITDA is projected to be $524-$526 million.

For the first quarter of 2022, Paycom estimates revenues between $342 million and $344 million. Management projects an adjusted EBITDA of $161-$163 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -6.24% due to these changes.

VGM Scores

At this time, Paycom has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 D. 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.