PCTY — Paylocity Holding Corp
Snapshot dated August 27, 2026.
Paylocity Holding Corp is a provider of cloud-based payroll and human capital management software solutions for medium-sized organizations. Its platform centralizes HR processes including time and attendance, talent acquisition, benefits administration, and performance management into a single unified application. The company primarily generates revenue through recurring subscription fees paid by clients for access to this software suite. Paylocity serves thousands of clients across various sectors in the United States, operating as a cloud-native challenger to legacy payroll providers. The firm maintains a direct sales force that focuses on onboarding mid-market businesses, typically those with 50 to 2,500 employees. Recently, the company has emphasized the expansion of its employee engagement tools, such as Community, which functions as an internal social collaboration platform to improve communication and retention for its clients' workforces.
Fair Value / Share
$169.70
Price on August 27, 2026
$157.69
Margin of Safety
7.62%
Data by Equibles and SEC filings. Figures are as of August 27, 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
$157.69
Market Cap
$8,558,467,060
Net Income (TTM)
$269,741,000
Diluted Shares
54.3 million
EPS (TTM)
$4.97
Earnings Yield
3.15%
AI Analysis
With a stock price of $157.69 and an EPS of $4.97, Paylocity currently produces an earnings yield of 3.15%. This figure sits below the 4-5% return available from safe, guaranteed alternatives like bonds. Mechanically, this yield implies that the current market price reflects an expectation of future earnings growth; investors are paying a premium today for the anticipation of larger earnings per share in the coming years. For this yield to rise, either the share price would need to decrease, or the actual earnings generated by the business would need to increase relative to the current valuation. This measure provides a snapshot of current earnings power relative to price but does not account for potential changes in the company's growth rate or long-term margin trends.
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 generated an EBIT of $386M using $102.3M in invested capital, resulting in a return on capital of 377.30%. This calculation is derived by dividing operating profit by the sum of net working capital and net fixed assets, which represent the tangible operating capital required to sustain the business. This figure sits well above the 30% benchmark typically associated with an efficient use of capital. Such a high ratio indicates that the company generates significant operating profit relative to the tangible assets deployed in its operations. This measure does not capture intangible factors like brand value or internal software development costs that might be expensed rather than capitalized. A lower return on capital could result if the company increases its spending on property, equipment, or working capital requirements, which would raise the denominator even if EBIT remains constant.
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 |
|---|---|---|---|
| ADPAutomatic Data Processing Inc | $6.2B | $115.6B | 18.7x |
| PAYXPAYCHEX INC | $2.5B | $49B | 19.5x |
| PCTYPaylocity Holding Corp | $386M | $8.4B | 21.7x |
Where PCTY sits: 21.7x against a peer median of 19.1x (peers: 19.5x and 18.7x) — 13.5% 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. It carries no separately reported lease obligations.
PAYX
Named as a competitor: Directly competes in cloud-based payroll and human capital management software for small to mid-sized businesses
Debt $4.6B. This is the company's reported total debt — borrowings due within a year plus long-term borrowings. It carries no separately reported lease obligations.
ADP
Named as a competitor: Major competitor in payroll, HR, and workforce management software solutions
Debt $5B. This is the company's reported total debt — borrowings due within a year plus long-term borrowings. It carries no separately reported lease obligations.
Operating earnings — PCTY
AI Analysis
Paylocity Holding Corp (PCTY) currently records an Acquirer's Multiple of 21.7x, derived from an enterprise value of $8.4B and TTM operating earnings of $386M. This compares to its competitors: Paychex (PAYX) has an Acquirer's Multiple of 19.5x, based on an enterprise value of $49B and operating earnings of $2.5B, while Automatic Data Processing (ADP) trades at 18.7x, with an enterprise value of $115.6B and operating earnings of $6.2B. Among the peer group, ADP maintains the lowest multiple, while PCTY holds the highest. The computed comparison places PCTY at 21.7x against a peer median of 19.1x, which is 13.5% above the median. This measure reflects the enterprise value divided by operating earnings; the result would shift if the company's operating profitability increased relative to its enterprise value, or if differences in capital structures and capital-intensity between these firms led the market to price their operating earnings differently.
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 a Strong level of current profitability, generating positive returns on its assets while backing up its reported earnings with significant cash flow.
- Return on Assets is positive at 5.52%
- Free Cash Flow to Total Assets is positive at 10.18%
- Accruals check passed with Cash Flow from Operations 1.98 times larger than Net Income
This score indicates the business is self-sustaining; a drop in cash flow relative to accounting profit would be the first sign of this pillar weakening.
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 the company reduced its share count and maintained a low debt burden but saw its liquidity position tighten slightly.
- Leverage decreased year over year from 0.04 to 0.02
- Liquidity declined as the current ratio fell from 1.14 to 1.09
- Net Dilution was avoided as the annual weighted average share count fell from 56.5 million shares to 54.8 million shares
The score reflects a healthy balance sheet, though a continued downward trend in the current ratio would suggest less flexibility in meeting short-term obligations.
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
Operating momentum is Strong, with the company expanding its margins and improving its cash generation efficiency compared to the prior year.
- Return on Assets improved from 5.17% to 5.52%
- Free Cash Flow to Total Assets improved from 9.23% to 10.18%
- Gross Margin increased from 68.77% to 69.19%
- Asset Turnover remained flat at 0.36
The improvement in three out of four operational checks suggests gains in pricing power or cost control, even as revenue per dollar of assets held steady.
Change in ROA (↑)
PassChange in FCFTA (↑)
PassChange in Gross Margin (↑)
PassChange in Asset Turnover (↑)
FailFramework conclusion
With a total score of 8/10, Paylocity is categorized as a financial rockstar, indicating high overall stability and operational health. This high score, driven by strong profitability and margin expansion, suggests that the company's current financial standing is robust rather than deteriorating. This measurement helps determine if a stock's price reflects its actual business performance or if there are internal signs of distress that a simple valuation might miss.
- Return on Assets improved to 5.52% from 5.17% last year
- Cash flow backed up earnings with an Accruals value of 1.98
- Net Dilution was negative as the share count decreased to 54.8 million shares
- Asset Turnover was the only improvement metric to lag, remaining unchanged at 0.36
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
Business value → share value
Intrinsic Value (business)
$9B
+ Cash & Equivalents
$271.9M
− Debt
$81.3M
= Shareholders' Value
$9.2B
÷ Diluted Shares
54.3 million
= Fair Value / Share
$169.70
Divided by 54.3 million diluted shares — the weighted-average diluted count from the most recent quarterly income statement, for the quarter ended 2026-03-31.
Risk bucket → discount rate
mid (12%)
Year-1 FCF
$501M
Growth rate (yrs 1–10)
11%
Terminal growth (after yr 10)
3%
AI Analysis
The valuation for Paylocity applies a 12% discount rate, reflecting a mid-risk classification that balances the company's established position in the HR software market against competitive pressures and broader economic cyclicality. The forecast is driven by an 11.00% annual growth rate, mirroring recent performance as the company matures. This analysis uses a fixed Year-1 unlevered free cash flow of $501M. Beyond the initial decade, the model employs a fixed 3% terminal growth rate, representing a long-term inflation baseline; consequently, the terminal value accounts for 52.4% of the total business value. Calculating the business worth yields $9B, which is adjusted for the $271.9M in cash and $81.3M in debt to arrive at an equity value of $9.2B. Dividing by the 54.3 million shares outstanding results in a fair value per share of $169.70. Against the current market price of $157.69, this creates a margin of safety of 7.62%, serving as a buffer for potential forecast errors. This result is most sensitive to the initial growth rate assumption, as small changes to this figure compound significantly over the ten-year projection period.
Overall Verdict
How the five signals above stack up together, then the full synthesis.
Earnings Yield
3.15% vs ~4-5% bond-yield benchmark
Return on Capital
377.3% ROC vs ~30% benchmark
Acquirer's Multiple
21.7x against a peer median of 19.1x (peers: 19.5x and 18.7x) — 13.5% above the median.
FS-Score
8/10 — Financial rockstar
Intrinsic Value
7.62% margin of safety
The framework presents a distinct tension between the company’s internal operational efficiency and its current market price. On the one hand, the Return on Capital of 377.3% and an FS-Score of 8/10 measure high operational productivity and financial health, placing the business well above standard benchmarks. Conversely, the valuation metrics indicate that this operational strength is reflected in the price. The Earnings Yield of 3.15% trails the 4-5% bond-yield benchmark, and the Acquirer's Multiple of 21.7x sits 13.5% above the peer median of 19.1x. The Intrinsic Value check registers a yellow signal with a 7.62% margin of safety, suggesting that the current share price leaves little room for deviation from projected cash flows. Ultimately, the business demonstrates strong internal performance, but the valuation metrics indicate that the market has fully priced in these operational results. A shift in the Earnings Yield, by moving closer to or above the bond-yield benchmark, would most significantly alter this overall picture.