For investors aiming to use shifting market chances, a method that joins sound basic business qualities with positive technical price behavior can be especially interesting. The process involves filtering for companies showing solid growth, good profitability, and secure finances, the signs of a lasting business, while also finding stocks whose charts are displaying helpful formations indicating a possible upward move. This two-part technique tries to locate securities where bettering technical force may be backed by a sound fundamental narrative, possibly presenting a good balance of risk and reward.
Paylocity Holding Corp (NASDAQ:PCTY) appears as a candidate matching this description. As a supplier of cloud-based human capital management (HCM) and payroll software, Paylocity works in an area with lasting need, helping businesses across the United States with tools to handle HR, talent, benefits, and payroll tasks.
Fundamental Strength: The Basis for Growth
A close look at Paylocity's fundamentals shows a company with a sound operational base, which is important for any growth stock to maintain its path. According to its fundamental analysis report, Paylocity receives a good total score of 6 out of 10, with high marks in important areas that match growth investment ideas.
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Profitability Strength: The company's profitability score is a high 8/10. Important measures highlight this:
- An Operating Margin of 19.15% puts it in the best 15% of its Professional Services industry group.
- It has a strong Return on Invested Capital (ROIC) of 18.02%, doing better than its cost of capital and showing good use of investor money to create earnings.
- Both profit and operating margins have gotten better in recent years.
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Continued Growth Path: Paylocity's growth score of 7/10 mirrors its past and predicted increase.
- Revenue has increased at a notable average yearly rate of 23.23% over recent years.
- Moving ahead, analysts forecast average yearly growth of 9.51% for revenue and 16.32% for earnings per share, showing beliefs for ongoing, though slower, increase.
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Financial Health Offers Stability: With a health score of 7/10, the company keeps a balance sheet that aids its growth plans. It holds a very small Debt-to-Equity ratio of 0.07 and could clear all its debt with under three months of free cash flow, giving notable financial room.
This mix of high profitability, solid growth, and good financial health is exactly what the filtering method looks for. It indicates Paylocity is not just increasing for the sake of increase, but is doing so effectively and from a place of soundness, a key qualitative factor for a good growth investment.
Technical Setup: A Formation of Stabilization
While the long-term direction for PCTY stays down, the technical view on a nearer-term scale is displaying signals of helpful activity that drew the filter's notice. The stock's technical score is poor, mainly because of its weak show over the past year. However, its setup score is a high 9/10, pointing out a specific chance within the wider trend.
The technical analysis report shows that after a large drop, PCTY's price activity has started to steady and stabilize. This process of forming a base is frequently a sign of a possible trend shift or upward move.
- The stock has been changing hands in a set span between about $142.50 and $155 over the past month, locating support close to its 50-day simple moving average.
- Lately, a "Pocket Pivot" signal was seen, a volume-based sign that hints at buying interest, where the stock rises on higher volume than any down volume day in the previous two weeks.
- A main resistance area sits just above the present price, between $151.44 and $154.88. A clear move above this area on high volume could signal the technical upward move the filter is made to find.
This technical setup is significant because it finds a possible entry point where a stock with sound fundamentals may be starting to gain fresh buying attention. The method suggests that a move upward from this stabilization, supported by the fundamental strengths noted before, could note the start of a new rising phase.
Valuation and Market Setting
Paylocity's valuation shows a varied image, getting a middle score of 4/10. With a P/E ratio near 20.6, it trades at a small reduction to the wider S&P 500 average and is similar to its industry group. While not low in value, the valuation is not high, especially when viewed next to its better profitability measures. For growth investors, paying a fair price for high-quality, increasing earnings is often an acceptable exchange, mainly when a positive technical setup hints that force may be changing.
Conclusion
Paylocity Holding Corp presents a situation where a filtering method joining fundamental and technical study has found a possible chance. The company displays the numerical standards key for growth investing: high profitability, a solid growth past, and good financial health. At the same time, its chart shows the qualitative price activity of a stock trying to base after a fall, with a set resistance level above that, if passed, could signal a new period of positive force.
This combined view does not promise a good result, but it gives an organized way to assess where a stock's bettering technical story is supported by a fundamentally sound business.
Interested in examining other stocks that match this description of solid growth joined with hopeful technical setups? You can use the same filter with our stock screener here.
Disclaimer: This article is for information only and does not make financial guidance, a suggestion to buy or sell any security, or a support of any investment method. The information given is based on supplied data and should not be the only base for making an investment choice. Investors should do their own study and think about their personal money situation and risk comfort before investing. Past show is not a sign of future outcomes.
