Paylocity Holding Corporation PCTY

Paylocity looks like a quality mid‑market HCM compounder: sticky, recurring revenue; disciplined operating leverage; and a long runway from deeper HCM attach, analytics/AI, and a nascent CFO‑suite expansion. Five‑year incremental ROIC near ~21.5% and consistently strong FCF support continued reinvestment and buybacks, and the balance sheet is resilient with net cash and ample liquidity (Key compounder indicators; Balance sheet (annual); Annual cash flow statements). Risks are real—competition, float sensitivity, privacy/payments regulation, and Airbase execution—but are acknowledged and mitigated by compliance credentials, diversified distribution, and conservative financial management (FY2025 10‑K; Strategic initiatives; Litigation analysis). On valuation, a scenario DCF centers around a base case fair value of about $167 per share versus a current price near $164, with a bear case near $96 and a bull case above $300 depending on growth, margins, and float (Valuation; Company profile and current stock price). For long‑term investors focused on durable economics, this is a solid business with a defensible moat and multiple ways to compound if ARPC expansion and operational discipline continue.