Paycom (PAYC) AI Stock Analysis

• Market Cap: $13.28B
• Dividend Yield: 0.66%
• Average Volume (3M): 591.41K
• Price to Earnings (P/E): 32.8
• Beta (1Y): 0.68
• Revenue Growth: 9.86%
• EPS Growth: -14.34%
• Country: US
• Employees: 7,306
• Sector: Technology
• Sector Strength: 93
• Industry: Software - Application
• EPS (TTM): 2.80
• Shares Outstanding: 57,819,756
• 10 Day Avg. Volume: 498,222
• 30 Day Avg. Volume: 591,410
• PEG Ratio: -1.50
• Price to Book (P/B): 7.25
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 33.39
• Enterprise Value/Market Cap: 0.93
• Enterprise Value/Revenue: 1.67
• Enterprise Value/Gross Profit: 8.05
• Enterprise Value/Ebitda: 4.01
• 1Y Price Target: $226.60
• Price Target Upside: -0.59% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 14

• Rating: 75 Outperform
• Price Target: $258.00 ▲(13.19%Upside)

Paycom's solid financial performance and positive earnings call outcomes are significant strengths, driving the overall score. However, mixed technical indicators and a high P/E ratio suggest potential caution. The strong shareholder confidence from the corporate events supports the positive outlook, but challenges like interest revenue decline remain considerations.

Positive Factors

Financial Performance

Revenue increased to approximately $531 million, above consensus, with nearly all the beat coming from recurring revenue.

International Expansion

International growth remains an attractive opportunity with expansion into countries like Canada, Mexico, Ireland, and the U.K.

Sales Growth

Strong bookings and revenue trends indicate changes management made to GTM over the last year are working to re-accelerate growth.

Negative Factors

Margin Challenges

It may be difficult for margins to continue expanding at such a robust clip, suggesting guidance may not be de-risked into a potential period of macro uncertainty.

Near-term Growth and Margin Visibility

Paycom is navigating turbulence caused by BETI, which has decreased near-term growth and margin visibility.

Paycom Business Overview & Revenue Model

Company Description

Paycom Software, Inc. provides cloud-based human capital management (HCM) solution delivered as software-as-a-service for small to mid-sized companies in the United States. It offers functionality and data analytics that businesses need to manage the employment life cycle from recruitment to retirement. The company's HCM solution provides a suite of applications in the areas of talent acquisition, including applicant tracking, candidate tracker, background checks, on-boarding, e-verify, and tax credit services; and time and labor management, such as time and attendance, scheduling/schedule exchange, time-off requests, labor allocation, labor management reports/push reporting, and geofencing/geotracking, and Microfence, a proprietary Bluetooth. Its HCM solution also offers payroll applications comprising better employee transaction interface, payroll and tax management, Paycom pay, expense management, mileage tracker/fixed and variable rates, garnishment management, and GL concierge applications; and talent management applications that include employee self-service, compensation budgeting, performance management, position management, and Paycom learning and content subscriptions, as well as my analytics, which offer employment predictor reporting. In addition, its HCM solution provides manager on-the-go that gives supervisors and managers the ability to perform a variety of tasks, such as approving time-off requests and expense reimbursements; direct data exchange; ask here, a tool for direct line of communication to ask work-related questions; document and checklist; government and compliance; benefits administration/benefits to carrier; COBRA administration; personnel action and performance discussion forms; surveys; and affordable care act applications, as well as Clue, which securely collect, track, and manage the vaccination and testing data of the workforce. Paycom Software, Inc. was founded in 1998 and is headquartered in Oklahoma City, Oklahoma.

How the Company Makes Money

Paycom makes money primarily through a subscription-based revenue model, where clients pay for access to its HCM software platform on a recurring basis. The company's key revenue streams include software subscriptions and related services. Subscription fees are charged based on the number of employees an organization has, making revenue scalable with the client's workforce size. Additionally, Paycom generates revenue from implementation and training services, which help clients effectively integrate and utilize the platform. The company's earnings are bolstered by its ability to retain clients through high-quality service and continuous platform enhancements, as well as its expansion into new markets and sectors.

Paycom Financial Statement Overview

Summary

Paycom showcases strong financial health with robust revenue growth, improving profit margins, and efficient cash flow management. The low debt-to-equity ratio further solidifies its stable financial position, although the relatively low equity ratio poses a potential risk.

Income Statement

Paycom has demonstrated strong revenue growth with a consistent upward trajectory from $737.67 million in 2019 to $1.88 billion in 2024. The gross profit margin remains robust at 82.2% in 2024, indicating efficient cost management. The net profit margin improved significantly from 19.5% in 2019 to 26.7% in 2024, showcasing enhanced profitability. EBIT and EBITDA margins have also shown positive trends, reinforcing operational efficiency.

Balance Sheet

The balance sheet reflects a solid financial position with a low debt-to-equity ratio of 0.05 in 2024, indicating minimal leverage. Return on equity has improved to 31.9% in 2024, highlighting effective use of shareholders' funds. The equity ratio stands at 26.9%, suggesting a stable capital structure. However, the relatively low equity ratio indicates potential risk if liabilities increase significantly.

Cash Flow

Paycom's cash flow is strong, with a free cash flow growth rate of 18.3% from 2023 to 2024, reflecting healthy cash generation. The operating cash flow to net income ratio is 1.06 in 2024, indicating efficient cash conversion from profits. The free cash flow to net income ratio is 0.68, showing substantial cash available after capital expenditures.

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
EBITDA	798.30M	503.37M	424.08M	284.29M	239.33M
Net Income	502.00M	340.79M	281.39M	195.96M	143.45M
Balance Sheet
Total Assets	5.86B	4.20B	3.90B	3.22B	2.61B
Cash, Cash Equivalents and Short-Term Investments	402.00M	294.02M	400.73M	277.98M	151.71M
Total Debt	83.40M	75.95M	29.00M	29.16M	30.89M
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: Neutral
• Last Price: 227.94
• 50DMA: Negative
• 100DMA: Negative
• 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 Neutral. The current price of 227.94 is below the 20-day moving average (MA) of 228.46, below the 50-day MA of 244.47, and above the 200-day MA of 217.42, indicating a neutral trend. The MACD of -4.46 indicates Negative momentum. The RSI at 44.55 is Neutral, neither overbought nor oversold. The STOCH value of 53.17 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for PAYC.

Paycom Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PCTY	79 Outperform	$10.29B	45.23	19.70%	―	14.63%	17.15%
MANH	78 Outperform	$12.27B	56.94	89.60%	―	9.18%	14.35%
PAYC	75 Outperform	$13.28B	32.79	24.99%	0.66%	9.86%	-14.34%
PYCR	74 Outperform	$4.09B	―	-1.66%	―	15.72%	74.59%
BILL	73 Outperform	$4.72B	482.28	0.97%	―	14.52%	―
Sector *	68 Neutral	¥228.97B	14.57	7.50%	2.73%	9.28%	6.70%
DUOL	62 Neutral	$16.84B	177.73	12.06%	―	39.14%	103.72%

Paycom Corporate Events

Paycom Holds 2025 Annual Meeting of Stockholders

On May 5, 2025, Paycom Software, Inc. held its 2025 Annual Meeting of Stockholders, where 50,440,118.15 shares were represented. Key outcomes included the election of two Class III directors, the ratification of Grant Thornton LLP as the independent auditor for 2025, and the approval of executive compensation, reflecting strong shareholder support for the company’s governance and strategic direction.