Paylocity Holding (PCTY) has quietly been grinding through a tough stretch, even as its payroll and HR software remain in steady demand. With shares still well below their past year highs, investors are re-checking the growth story.

The recent pullback, including a double digit 90 day share price return decline and a weaker one year total shareholder return, suggests momentum has cooled as investors reassess how much to pay for Paylocity’s slower but still positive growth.

While Paylocity works through this softer patch, it can be useful to compare it with other business software names and explore high growth tech and AI stocks as potential opportunities on your radar.

With shares down sharply over the past year despite ongoing revenue and profit growth, Paylocity now trades at a hefty discount to analyst targets. This raises the question: is this a mispriced growth story, or is the slowdown fully reflected?

Most Popular Narrative Narrative: 24.5% Undervalued

Compared to Paylocity Holding's last close of $146.52, the most followed narrative points to a materially higher fair value anchored in sustained growth and rising margins.

Strong client retention (92%+) and accelerating cross-sell of new modules (including Paylocity for Finance) are yielding steady margin expansion and improved operating leverage, evidenced by rising adjusted EBITDA margins and free cash flow, which could lead to higher net margins in the future.

Want to see what powers that margin story? The narrative focuses on durable double digit growth, thickening profit margins, and a rich earnings multiple. Curious how those pieces combine into one bold valuation call?

Result: Fair Value of $194.16 (UNDERVALUED)

However, slowing revenue growth and tougher competition from larger HCM and payroll players could pressure Paylocity’s margins and challenge that upbeat valuation story.

Another Take on Valuation

Those bullish fair value estimates clash with how the market is currently pricing Paylocity. At 35.3 times earnings, the stock trades far richer than both peers at 18.4 times and a fair ratio of 26.9 times, hinting at real downside risk if sentiment sours further.

Build Your Own Paylocity Holding Narrative

If you see the story differently or want to dig into the numbers yourself, it only takes a few minutes to craft your own view: Do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Paylocity Holding.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.