Paycom (PAYC) AI Stock Analysis

• Market Cap: $12.61B
• Dividend Yield: 0.68%
• Average Volume (3M): 643.65K
• Price to Earnings (P/E): 24.7
• Beta (1Y): 0.83
• Revenue Growth: 11.19%
• EPS Growth: 51.03%
• Country: US
• Employees: 7,308
• Sector: Technology
• Sector Strength: 48
• Industry: Software
• EPS (TTM): 8.90
• Shares Outstanding: 57,264,717
• 10 Day Avg. Volume: 720,703
• 30 Day Avg. Volume: 643,654
• PEG Ratio: 0.48
• Price to Book (P/B): N/A
• Price to Sales (P/S): 6.70
• Price to Cash Flow (P/CF): 19.70
• P/FCF Ratio: 29.90
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $216.30
• Price Target Upside: -0.42% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 15

Paycom's robust financial performance and effective management of growth and profitability are key strengths. The positive technical indicators and fair valuation support an optimistic outlook, though liquidity and slower client growth warrant monitoring. Strategic leadership changes further bolster future growth prospects.

Positive Factors

Financial Performance

Paycom's EBITDA of $215mm, which translated to a margin of ~43.5%, topped expectations by 4 points as the company leveraged sales and marketing well.

Sales Performance

Management highlighted continued strength in the selling environment, which contributed to a record sales month, alongside improving execution from the CRR team.

Negative Factors

Revenue Growth

Recurring revenue ex float decelerated to 8.5% year-over-year, compared to 10.5% in the previous quarter.

Paycom Business Overview & Revenue Model

Company Description

Paycom Software, Inc. (PAYC) is a prominent provider of cloud-based human capital management (HCM) software solutions for businesses across various industries. Headquartered in Oklahoma City, Oklahoma, Paycom offers a comprehensive suite of services designed to streamline employment processes, including talent acquisition, time and labor management, payroll, talent management, and human resources management. By integrating these functions into a single platform, Paycom empowers organizations to enhance their HR efficiency and improve employee experiences.

How the Company Makes Money

Paycom generates revenue primarily through the sale of its software-as-a-service (SaaS) offerings. The company charges subscription fees to businesses for accessing its integrated HCM platform, which is typically based on a per-employee, per-month pricing model. This subscription model provides a recurring revenue stream, contributing to Paycom's financial stability. Additionally, Paycom may earn revenue from implementation services, training, and customer support, although the bulk of its income is derived from its core software subscriptions. The company's growth is also supported by its ability to retain existing clients and attract new ones, often through a direct sales force and a focus on high-quality customer service. Paycom's strategic partnerships with various entities, such as payroll processors and professional employer organizations, further enhance its market reach and revenue potential.

Paycom Financial Statement Overview

Summary

Paycom demonstrates strong revenue growth and high profitability margins. The company maintains robust operational efficiency and effective cash flow management. However, liquidity risks due to relatively low cash compared to liabilities need attention.

Income Statement

Paycom has demonstrated strong growth in its revenue with a notable year-over-year increase from $1.69 billion to $1.88 billion, reflecting a revenue growth rate of approximately 11.2%. The company maintains a high gross profit margin of 82.2% and a robust net profit margin of 26.7%, indicating efficient cost management and consistent profitability. EBIT and EBITDA margins are also healthy at 33.7% and 37.8% respectively, showcasing operational efficiency. Overall, the income statement reflects a company with strong growth momentum and effective margin management.

Balance Sheet

Paycom's balance sheet indicates a stable financial position with a debt-to-equity ratio of 0.05, signifying low financial leverage and risk. The equity ratio stands at 26.9%, demonstrating a solid equity base relative to total assets. The return on equity is impressive at 31.9%, highlighting effective utilization of equity to generate profit. However, the relatively low cash and short-term investments compared to total liabilities might pose liquidity risks. Overall, the balance sheet shows a well-managed capital structure with strong equity returns but potential liquidity concerns.

Cash Flow

Paycom's cash flow statement reveals strong cash generation capabilities with an operating cash flow to net income ratio of 1.06, indicating efficient conversion of net income into cash. Free cash flow has grown from $288.2 million to $341 million, a solid growth rate of approximately 18.3%. The free cash flow to net income ratio is 0.68, showing a satisfactory level of free cash flow relative to profits. Overall, the cash flow statement suggests robust cash management and growing free cash flow, supporting future investments and financial flexibility.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
1.88B	1.69B	1.38B	1.06B	841.43M
	Gross Profit
1.55B	1.42B	1.16B	893.64M	717.89M
	EBIT
634.30M	451.32M	378.68M	253.57M	186.12M
	EBITDA
798.30M	503.37M	424.08M	284.29M	239.33M
	Net Income Common Stockholders
502.00M	340.79M	281.39M	195.96M	143.45M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
402.00M	294.02M	400.73M	277.98M	151.71M
	Total Assets
5.86B	4.20B	3.90B	3.22B	2.61B
	Total Debt
83.40M	75.95M	29.00M	29.16M	30.89M
	Net Debt
-318.60M	-218.08M	-371.73M	-248.82M	-120.82M
	Total Liabilities
4.28B	2.89B	2.72B	2.32B	1.95B
	Stockholders Equity
1.58B	1.30B	1.18B	893.71M	655.64M
Cash Flow		Free Cash Flow
341.00M	288.21M	228.31M	193.17M	133.10M
	Operating Cash Flow
533.90M	485.04M	365.10M	319.36M	227.21M
	Investing Cash Flow
-22.20M	-196.71M	-23.29M	-257.67M	-117.88M
	Financing Cash Flow
1.11B	-274.66M	254.59M	165.72M	-165.91M

Paycom Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 217.21
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PAYC, the sentiment is Positive. The current price of 217.21 is above the 20-day moving average (MA) of 212.05, above the 50-day MA of 208.59, and above the 200-day MA of 182.86, indicating a bullish trend. The MACD of 2.90 indicates Negative momentum. The RSI at 56.12 is Neutral, neither overbought nor oversold. The STOCH value of 67.90 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for PAYC.

Paycom Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PAYX	80 Outperform	$54.61B	31.91	43.80%	2.56%	4.18%	5.67%
INTU	79 Outperform	$171.61B	57.36	16.92%	0.65%	13.73%	9.93%
WDAY	79 Outperform	$67.47B	129.59	5.82%	―	17.04%	-62.24%
PAYC	78 Outperform	$12.61B	24.70	31.85%	0.68%	11.19%	51.03%
ADP	77 Outperform	$127.53B	32.70	77.46%	1.80%	7.09%	11.51%
XYZ	74 Outperform	$36.82B	13.06	13.62%	―	10.06%	38060.98%
Sector *	59 Neutral	$22.39B	11.53	-18.05%	2.31%	5.00%	-25.89%

Paycom Corporate Events

Paycom Names Bob Foster as New CFO

On February 12, 2025, Paycom announced Bob Foster as the new Chief Financial Officer, effective February 21, following Craig Boelte’s retirement. Foster, who has been with Paycom since 2022 and previously led iiPay, will focus on long-term planning and financial strategies as CFO. This leadership change marks a new chapter in Paycom’s growth, continuing its focus on delivering strong returns for clients and advancing its position in the human capital management industry.

Paycom Appoints Joe Binz to Board of Directors

Paycom Software, Inc. has appointed Joe Binz, currently the chief financial officer at Atlassian, to its Board of Directors as a Class II director. Binz’s extensive experience in the technology sector, particularly his leadership roles at Atlassian, Microsoft, and Intel, is expected to support Paycom’s growth and value delivery to clients and stakeholders.