Dealmaker’s Diary: Tax Cuts Could Be Rocket Fuel for This HR Command Center

Alpesh Patel|November 14, 2024

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Tax cuts… deregulation… tariffs…

Of the three big promises President-elect Trump has made…

Tax cuts will be the biggest boon for the American workforce as businesses across the economy will have more money for hiring.

And that could be rocket fuel for this cloud-based payroll and human capital management software provider.

Revenue is growing… up nearly 20% year over year in the third quarter.

The company is investing in AI to boost its hiring, retention, and training offerings…

And it is a cash king… with an outstanding CROCI score – my favorite metric – of nearly 30!

Get ready to ride the coming wave of job growth with this one.

Get all the details on the company – including its ticker – in my latest video.

This the kind of research my clients pay thousands for… but you get it for FREE as a Total Wealth subscriber.

Click on the image below to dive in.

TRANSCRIPT

Hi, friends. Welcome to the Dealmaker’s Diary and Stock of the Week. Here’s the grand reveal…

Paylocity (PCTY).

Look, the biggest event that’s happened is obviously the U.S. election. I’m mindful of that. I’m making sure things tie in with that but are not exclusively linked to that necessarily.

Paylocity provides cloud-based payroll and human capital management software solutions.

Importantly, if we’re going to get this dash for growth and corporate tax drops in the U.S., then we should get greater employment. Something President Trump likes to pride himself on is job creation.

So that should be good for the company as well.

Revenues are relatively small. It’s not a massive company.

It’s also been investing on the AI side.

The numbers that attracted me were on my proprietary Growth-Value-Income algorithm, which looks at the valuation of a company, the growth of a company, income of a company, and weighs those factors. Paylocity is an 8. So above the minimum of 7 I require.

The forecast P/E is a bit expensive, but it is basically a tech company, a software tech company. The P/E is 31.90 – that’s what you’re paying for every forecasted dollar of profit.

Cash return on capital invested – or CROCI, that Goldman Sachs wealth management number – is through the roof at 29.6. Phenomenal. See how I use CROCI to pick winning stocks here.

I would have preferred if volatility was a couple of points lower, but I can live with that.

So enough boxes ticked.

I’ve drawn a projection on the chart, which if the monthly momentum continues in the direction it’s due, which is what I’m expecting – then that’s the projected growth.

You can see it’s a substantial gain that I’d be looking at going forward in the company.

It is on a discount cash flow, pretty much fairly valued. Discount cash flows are nice to have if you can get them because they’re so sensitive to small number changes.

I don’t pay too much attention to them, but it’s nice when they agree with me. When they don’t agree with me, I’m more than happy to ignore them if all the other numbers, which I think are more substantive, apply anyway.

Thank you very much. I hope you have been informed and entertained with this Dealmaker’s Diary Stock of the Week.

Thank you.