PCTY — Paylocity Holding Corp
Snapshot dated September 28, 2026.
Paylocity Holding Corp provides cloud-based human capital management and payroll software solutions tailored for mid-sized organizations. Its platform integrates various functions into a single system, including payroll processing, time and labor tracking, benefits administration, and talent management tools like recruitment and performance reviews. The company differentiates itself through its 'Community' product, an internal social collaboration tool designed to improve employee engagement within the HR suite. Paylocity serves thousands of clients across the United States, competing primarily against legacy payroll providers like ADP and Paychex, as well as modern, integrated SaaS platforms. In recent strategic moves, the company has increasingly focused on expanding its automation capabilities and enhancing its mobile interface to better serve remote and hybrid workforces.
Fair Value / Share
$168.16
Price on September 28, 2026
$143.35
Upside to fair value
17.31%
Margin of safety 14.8%
Upside is measured against what you pay; margin of safety is measured against what the business is worth.
Data by Equibles and SEC filings. Figures are as of September 28, 2026 and are not live.
Earnings Yield
Earnings Yield shows how much profit a company generates relative to its share price. EPS ÷ Stock Price.
Stock Price
$143.35
Market Cap
$7,851,279,500
Net Income (TTM)
$269,741,000
Diluted Shares
54.8 million
EPS (TTM)
$4.92
Earnings Yield
3.44%
AI Analysis
Paylocity generated an earnings yield of 3.44%, calculated using a stock price of $143.35 and EPS of $4.92. This figure sits below the 4-5% return benchmark commonly available through safer alternatives like bonds. A lower yield indicates that the current market price requires a higher multiple of existing earnings, implying that expectations for future earnings growth are baked into the share price. For this yield to increase, the stock price would need to decline while earnings remain constant, or the company would need to generate higher annual earnings at the same price point. This single measure captures the relationship between current market price and past earnings, but it does not account for changes in debt levels, future capital expenditures, or the sustainability of growth rates.
Return on Capital
EBIT ÷ (Net Working Capital + Net Fixed Assets) — how efficiently the business turns capital into profit.
EBIT (TTM)
$385,993,000
Net Working Capital
$30,901,000
Net Fixed Assets
$71,403,000
Invested Capital
$102,304,000
Return on Capital
377.3%
AI Analysis
Paylocity Holding Corp (PCTY) shows a return on capital of 377.30%. This figure is derived by dividing its EBIT of $386M by its invested capital of $102.3M, which comprises $30.9M in net working capital and $71.4M in net fixed assets. This result sits significantly above the 30% benchmark used to identify an efficient use of operating capital. This metric suggests the business generates high levels of profit relative to its required tangible operating capital. The ratio would change if the company’s operating profit were to shift or if the business model required larger investments in physical infrastructure or working capital to sustain its operations. It is important to note that this measure does not account for intangible assets like software or customer relationships, which can be significant drivers of value in software-focused business models, potentially inflating the return on tangible capital.
Acquirer's Multiple
Enterprise Value ÷ Operating Earnings — how many years of operating earnings it would take to buy the whole business.
| Company | Operating earnings | Enterprise value | Multiple |
|---|---|---|---|
| PAYXPaychex Inc | $2.6B | $40.1B | 15.5x |
| PAYCPaycom Software, Inc. | $648.4M | $10.8B | 16.7x |
| PCTYPaylocity Holding Corp | $386M | $7.7B | 19.8x |
Where PCTY sits: 19.8x against a peer median of 16.1x (peers: 16.7x and 15.5x) — 23.3% above the median.
Show the enterprise value bridge for each companyHide the enterprise value bridge
PCTY
Debt $81.3M. This is the company's reported total debt — borrowings due within a year plus long-term borrowings. The company separately reports $51.7M of operating lease liabilities as of 2026-06-30 ($42.2M non-current, $9.5M current). These are excluded from debt because operating lease cost already sits inside operating earnings — counting the liability again as debt would charge the business twice for the same thing.
PAYC
Named as a competitor: Directly competes in cloud-based payroll and human capital management software for mid-market businesses
Debt $900M. This is the company's reported total debt — borrowings due within a year plus long-term borrowings. The company separately reports $82.8M of operating lease liabilities as of 2026-06-30 ($54M non-current, $28.8M current). These are excluded from debt because operating lease cost already sits inside operating earnings — counting the liability again as debt would charge the business twice for the same thing.
PAYX
Named as a competitor: Provides integrated payroll, HR, and benefits solutions targeting small-to-medium-sized businesses
Debt $4.6B. This is the company's reported total debt — borrowings due within a year plus long-term borrowings. The company separately reports $62.9M of operating lease liabilities as of 2026-08-31. These are excluded from debt because operating lease cost already sits inside operating earnings — counting the liability again as debt would charge the business twice for the same thing.
Operating earnings — PCTY
AI Analysis
The Acquirer's Multiple measures the price of a business relative to its operating earnings. Paylocity (PCTY) has an enterprise value of $7.7B and operating earnings of $386M, resulting in an Acquirer's Multiple of 19.8x. Among the peer group, Paylocity's multiple is 19.8x, while Paylocity's competitors, Paycom (PAYC) and Paychex (PAYX), show multiples of 16.7x and 15.5x, respectively. Consequently, Paychex has the lowest multiple in the group, and Paylocity has the highest. The computed comparison for Paylocity is 19.8x against a peer median of 16.1x (peers: 16.7x and 15.5x) — 23.3% above the median. This comparison reflects current enterprise values relative to recent operating performance. This gap could narrow if Paylocity increases its operating earnings significantly or if changes in its capital structure reduce its enterprise value, though the measure does not account for differences in growth rates or capital intensity between these specific firms.
FS-Score
A 10-check read on financial health, across profitability, balance-sheet stability and operating momentum.
FS-Score
8/10
This company scores high on profitability, stability, and momentum.
Section 1
Current Profitability
3/3
Paylocity shows Strong profitability, meeting all three checks for generating real money and cash-backed earnings.
- Return on Assets of 5.52% indicates positive bottom-line profitability relative to the asset base.
- Free Cash Flow to Total Assets of 10.18% shows a high rate of cash generation.
- An Accruals ratio of 1.98 demonstrates that cash flow from operations significantly exceeds net income, suggesting high-quality earnings.
A score of 3/3 indicates a business currently generating surplus cash; this would only reverse if accounting earnings became detached from actual cash receipts.
Return on Assets (ROA > 0)
PassFree Cash Flow to Total Assets (FCFTA > 0)
PassAccruals (CFO / Net Income > 1)
PassSection 2
Stability
2/3
The stability profile is Mixed, as a reduction in debt and share count was offset by a slight narrowing of the liquidity buffer.
- Leverage decreased from 0.04 to 0.02, indicating a reduced reliance on long-term debt.
- Liquidity declined as the current ratio shifted from 1.14 to 1.09 year over year.
- Net Dilution was avoided as the diluted weighted-average share count decreased to 54.8 million shares from 56.5 million shares.
The score of 2/3 reflects a healthy capital structure, though a further decline in the current ratio would suggest tightening short-term liquidity.
Change in Leverage (↓ or unchanged)
PassChange in Liquidity (↑ Current Ratio)
FailNet Dilution (annual diluted weighted-average shares, this year vs last)
PassSection 3
Recent Operational Improvements
3/4
Recent operational improvements are Strong, with the company becoming more efficient in three of the four measured areas.
- Return on Assets improved from 5.17% to 5.52%, showing increased profitability per dollar of assets.
- Free Cash Flow to Total Assets rose from 9.23% to 10.18%, signaling better cash conversion.
- Gross Margin increased to 69.19% from 68.77%, suggesting slightly better cost control or pricing.
- Asset Turnover remained flat at 0.36, missing the improvement benchmark.
Operational momentum is positive across most metrics, though a higher asset turnover would be required to show increased sales efficiency.
Change in ROA (↑)
PassChange in FCFTA (↑)
PassChange in Gross Margin (↑)
PassChange in Asset Turnover (↑)
FailFramework conclusion
With a total score of 8/10, the company shows significant financial stability, driven by strong profitability and operational improvements. This high score suggests that if the stock is trading at a low multiple, the price is more likely a result of market sentiment rather than underlying business deterioration. The combination of cash-backed earnings and declining debt levels characterizes a company with a firm financial footing.
- Cash generation is robust with Free Cash Flow to Total Assets at 10.18%.
- Earnings quality is supported by a 1.98 ratio of cash flow to net income.
- Shareholders are not being diluted, as the share count fell to 54.8 million shares.
- Operating efficiency is rising, as evidenced by the Gross Margin increasing to 69.19%.
Intrinsic Value (DCF)
A 10-year discounted cash flow, then the bridge from business value to value per share.
Reported cash flow → unlevered free cash flow
Free Cash Flow (reported)
$497.1M
+ After-Tax Interest Expense
$3.9M
= Unlevered Free Cash Flow
$501M
Business value (10-year DCF)
PV of Years 1–10
$4.3B
PV of Terminal Value
$4.7B
= Business Value
$9B
Terminal value share
52.35%
Business value → share value
Intrinsic Value (business)
$9B
+ Cash & Equivalents
$271.9M
− Debt
$81.3M
= Shareholders' Value
$9.2B
÷ Diluted Shares
54.8 million
= Fair Value / Share
$168.16
Divided by 54.8 million diluted shares — the weighted-average diluted count from the most recent quarterly income statement, for the quarter ended 2026-06-30.
Risk bucket → discount rate
mid (12%)
Year-1 FCF
$501M
Trailing twelve months.
FY2024 $366.6M · FY2025 $405.2M · FY2026 $497.1M
Growth rate (yrs 1–10)
11%
Terminal growth (after yr 10)
3%
AI Analysis
Paylocity's valuation uses a 12% discount rate, reflecting the risk profile of its position in the competitive HR and payroll software market, balanced against its sensitivity to broader economic conditions. The forecast anchors on a fixed Year-1 free cash flow of $501M, derived from trailing-twelve-month results. For the ten-year growth forecast, an 11.00% rate is applied, reflecting the company’s recent free cash flow expansion while applying a conservative horizon for sustained growth. The model applies a fixed 3% terminal growth rate, which is a standard assumption and not a specific judgment on this business. To derive the fair value per share, the intrinsic value of the business—the sum of the discounted cash flows—is adjusted by adding cash and equivalents of $271.9M and subtracting $81.3M in debt before dividing by 54.8 million diluted shares. This calculation results in a fair value per share of $168.16. Against the current price of $143.35, the upside to fair value is 17.31%. This estimate carries a margin of safety of 14.8%, which serves as the calculated buffer the valuation allows for errors in the underlying assumptions. The fair value estimate is most sensitive to the growth rate assumption, as even minor adjustments to the 11.00% annual expansion rate significantly alter the projected terminal value.
Overall Verdict
How the five signals above stack up together, then the full synthesis.
Earnings Yield
3.44% vs ~4-5% bond-yield benchmark
Return on Capital
377.3% ROC vs ~30% benchmark
Acquirer's Multiple
19.8x against a peer median of 16.1x (peers: 16.7x and 15.5x) — 23.3% above the median.
FS-Score
8/10 — Financial rockstar
Intrinsic Value
17.31% upside to fair value
The analysis of PCTY presents a divergence between operational strength and current market pricing. The FS-Score of 8/10 and the Return on Capital of 377.3% indicate that the business generates significant efficiency from its capital base, positioning it well above the 30% benchmark for operational performance. Conversely, the valuation metrics reflect a different condition. The Earnings Yield of 3.44% falls below the 4-5% bond-yield benchmark, and the Acquirer's Multiple of 19.8x sits 23.3% above the peer median. While the Intrinsic Value check estimates a 17.31% upside to fair value—resulting in a margin of safety of 14.8%—the overall picture remains balanced between these high-efficiency markers and the premium attached to the current price. This tension suggests that while the internal mechanics of the company are robust, the market price currently accounts for that performance. A significant shift in the overall signal would most likely result from a change in the Acquirer’s Multiple, as valuation compression would realign the price with the lower-multiple peer group.
Comments
Notes from readers on PCTY — one each. Comments stay with the company, so they carry across to a later snapshot, and each one shows the date it was written.
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