Paylocity Holding Corp (PCTY) DCF Valuation & Fundamental Primer
Paylocity Holding Corp (PCTY) currently trades at $142.14 with an enterprise value of $8.30B. Our proprietary institutional model rates Paylocity Holding Corp at 78/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of 15.1% vs. historical growth of 16.5% (Fairly Priced to Fundamentals).
Institutional fundamental teardown of Paylocity Holding (PCTY) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Paylocity Holding Corp (PCTY) 3-Scenario DCF Valuation Range
Institutional Software Quality Scorecard (78/100 · Grade A)
Strong fundamentals, above-average cash generation, and robust competitive positioning.
Elite deferred revenue float; FCF exceeds operating income by >20%
Standard software SBC dilution; modest equity transfer to employees
Solid gross margins with potential for operating leverage at scale
Positive net cash cushion; self-funding operations with zero insolvency risk
Core Investment Strengths & Moats
- High-grade cash conversion: FCF is 171% of EBIT driven by upfront annual collections
- Net cash positive: $180.2M balance sheet buffer
Key Operational & Dilution Risks
Reverse-DCF Solver: What Growth is Priced Into PCTY?
Market implies 15.1% annual revenue growth over next 5 years, in line with company run-rate.
Paylocity Holding Corp (PCTY) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $1.50B | $1.50B | $1.75B | $2.04B | $2.37B | $2.77B | $3.22B |
| Gross Profit | $1.00B | $1.00B | $1.17B | $1.36B | $1.58B | $1.84B | $2.15B |
| Operating Income (EBIT) | $200.0M | $200.0M | $233.0M | $271.6M | $316.5M | $368.8M | $429.8M |
| Stock-Based Compensation (SBC) | $142.8M | $142.8M | $166.4M | $193.9M | $226.0M | $263.4M | $307.0M |
| Unlevered Free Cash Flow (FCF) | $342.8M | $342.8M | $399.4M | $465.5M | $542.5M | $632.2M | $736.8M |
| SBC-Adjusted True Cash Flow | $199.9M | $200.0M | $233.0M | $271.6M | $316.5M | $368.8M | $429.8M |
Core Enterprise SaaS & ERP Peer Comparables Matrix
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| Paylocity Holding Corp | PCTY | $8.04B | $1.50B | 66.7% | 22.9% | 39.4% | 9.5% | 5.2× |
| ServiceNow, Inc. | NOW | $192.40B | $10.98B | 79.5% | 31.5% | 54.0% | 15.8% | 17.2× |
| Workday, Inc. | WDAY | $38.74B | $2.98B | 74.9% | 20.8% | 41.1% | 17.1% | 12.5× |
| Oracle Corporation | ORCL | $13.08B | $957.1M | 71.9% | 20.4% | 48.0% | 18.2% | 13.4× |
| SAP SE | SAP | $10.73B | $803.6M | 71.7% | 24.9% | 49.5% | 19.6% | 13.0× |
| Intuit Inc. | INTU | $20.52B | $1.98B | 79.4% | 29.9% | 58.2% | 20.5% | 10.0× |
| Adobe Inc. | ADBE | $218.79B | $21.51B | 88.6% | 37.5% | 49.0% | 8.6% | 10.1× |
| Peer Cohort Median Benchmark (N=6) | 77.2% | 27.4% | 49.3% | 17.6% | 12.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 5.2× | $7.86B | $8.04B | $142.14 | 0.0% |
| -20% Multiple Compression | 4.2× | $6.29B | $6.47B | $114.35 | -20.0% |
| -35% Multiple Compression | 3.4× | $5.11B | $5.29B | $93.51 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $7.50B | $7.68B | $135.81 | -4.6% |
Frequently Asked Questions: Paylocity Holding Corp (PCTY) Valuation
What is Paylocity Holding Corp (PCTY)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, Paylocity Holding Corp (PCTY) has a Base Case implied value of $149.91 per share (with a Bear Case of $70.84 and a Bull Case of $254.77), compared to its current price of $142.14. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Paylocity Holding Corp (PCTY)'s Rule of 40 score and Free Cash Flow margin?
Paylocity Holding Corp achieves a Rule of 40 score of 39.4%, combining a 16.5% revenue growth run-rate with a 22.9% TTM free cash flow margin on $1.50B in trailing twelve-month revenue. In the Core Enterprise SaaS & ERP peer cohort, the median Rule of 40 benchmark is 49.3%.
What revenue growth rate is priced into PCTY stock according to Reverse-DCF analysis?
At $142.14 per share (Enterprise Value of $7.86B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 15.1%, compared to Paylocity Holding Corp's historical CAGR of 16.5%. Overall market expectations are rated as "Fairly Priced to Fundamentals".
How does Paylocity Holding Corp compare to Core Enterprise SaaS & ERP software peers?
Paylocity Holding Corp (PCTY) earns an institutional Software Quality Score of 78/100 (Grade A — High-Quality Compounder). Across its Core Enterprise SaaS & ERP peer group (NOW, WDAY, ORCL, SAP, INTU), the cohort trades at a median EV/TTM Revenue multiple of 12.8× and a median gross margin of 77.2%.
How does Stock-Based Compensation (SBC) impact Paylocity Holding Corp (PCTY)'s valuation?
Paylocity Holding Corp recorded $142.8M in TTM stock-based compensation (9.5% of revenue). When treating SBC as a cash-equivalent compensation expense, Paylocity Holding Corp's SBC-adjusted free cash flow yield is 2.5%, scoring 16/25 on our Shareholder Dilution Friction pillar.