Paycom Software (PAYC)

Market Cap: 2.7 B
Sector: Technology Application Software
Sales Growth Q/Q: 47.1%
EPS Growth This Year: 89.50%
EPS Growth Next Year: 30.90%
Gross Margin: 83.60%
Return on Equity: 22%


Paycom is growing fast! They recently announced third quarter results with revenues increasing 50% Quarter over Quarter. Beating earnings estimates for the 6th straight quarter and raising full year revenue guidance, this company is showing strong organic growth in a market struggling for sales.

The stock was rewarded today as shares soared 17% on six times the average trading volume. When this kind of demand comes into a stock after a multi-month consolidation, the subsequent gains can be impressive.

PAYC Daily

Today's action has the look of a "breakaway gap". The stock has been emerging from a sideways range and after pulling back to the 50 DMA, today's response to earnings propelled the stock to new all-time highs.

There appears to be tremendous strength behind this breakout as trading volume was at a new all-time high. The MACD indicator confirms a strengthening trend and Relative Strength vs the SP500 also set a new record high.

PAYC Weekly

The longer term weekly chart is setup similarly.

The market is suggesting Paycom is ready to begin a new leg higher. This is an emerging trend we can be a part of while managing our risk at the same time. The trade may need some room to breathe while it develops its new uptrend, so our stops should be far enough away for the stock to safely pullback, but also close enough that no real damage will be done to our capital should the market not cooperate. Due to the recent consolidation, the pivot low at $36 can be our initial stop.

With the way Paycom is growing, in an environment that's desperate for sales, this stock could double within the next year. Make no mistake, PAYC is not cheap. But this market isn't looking for cheap, this market has been rewarding growth, especially growth in revenues. With performance anxiety likely to increase among fund managers, stocks like Paycom will be easy targets for Alpha into year-end.