Paycor Earnings: Strong Profitability Upside and Upmarket Momentum Underpin Quarter

We maintain our fair value estimate for no-moat Paycor at $21 per share, following solid fourth-quarter fiscal 2024 results, which slightly beat both our revenue and profitability expectations. We are pleased to see increased hiring in the firm's sales team fueling topline growth and average deal size during the fiscal year. We maintain our expectations of near-term growth driven by greater module uptake and growing deal size, but we anticipate pressures from dominant providers like ADP and Paychex to weigh in over long-term growth. Following the results, we've trimmed our near-term estimates to align with management guidance, but this is offset by time value of money. Shares trade at a discount to our valuation on a risk-adjusted basis, but we continue to point investors to moatier software names in our coverage.