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Paylocity Holding Corporation (PCTY) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Paylocity Holding Corporation (PCTY)

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Intrinsic Value (DCF)

Current$141.65
→
Intrinsic$217.38
+53%
$149.02$217.38$347.08
Market implies 14% growth for 5 years
DCF analysis suggests PCTY could have 53% upside at 25% growth — verify assumptions match your view.
At $142, the market prices in 14% annual cash flow growth — a moderate expectation aligned with historical trends (25%).
Range: Bear $149 → Bull $347. Current price implies expectations below the bear case — very conservative expectations.
Discount ↓Growth →21%23%25%27%
8%$267$288$311$335
10%$188$202$217$234
12%$144$154$166$178
14%$116$124$133$143

Bull Case

  • Bull case ($347) offers 145% upside at 30% growth, 9% discount
  • Price below even worst-case scenario — strong margin of safety
  • Market-implied growth (14%) ≤ historical CAGR (25%)

Bear Case

  • Bear case ($149) with 20% growth, 12% discount rate
  • Using 25% growth — aggressive, watch for mean reversion
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5-Year Free Cash Flow Projection

Year 1$428.44M
Year 2$535.55M
Year 3$669.44M
Year 4$836.79M
Year 5$1.05B
Terminal$15.39B

📐 Model Inputs

Growth Rate25.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$342.75MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is PCTY stock undervalued or overvalued?
🟢 UNDERVALUED

PCTY trades at $141.65 vs. our DCF-derived intrinsic value of $180.62, implying +18% upside. At a 10.0% WACC and 25.0% projected FCF growth, the market appears to be underpricing the present value of PCTY's future cash flows. The bear case ($119.57) still suggests upside, providing margin of safety.

What is PCTY's intrinsic value?

Using a 5-year DCF model: Base FCF of $343M, projected at 25.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-180M net debt and dividing by 0.06B shares: Bear $119.57 | Base $180.62 | Bull $270.53. Current price $141.65 implies +18% to base case.

How is PCTY's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 25.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($10.03B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 29.3x.