Paycom (PAYC) AI Stock Analysis

• Market Cap: $15.03B
• Dividend Yield: 0.58%
• Average Volume (3M): 614.40K
• Price to Earnings (P/E): 37.1
• Beta (1Y): 0.77
• Revenue Growth: 9.86%
• EPS Growth: -14.34%
• Country: US
• Employees: 7,306
• Sector: Technology
• Sector Strength: 77
• Industry: Software - Application
• EPS (TTM): 2.80
• Shares Outstanding: 57,819,756
• 10 Day Avg. Volume: 732,585
• 30 Day Avg. Volume: 614,398
• PEG Ratio: 3.90
• Price to Book (P/B): 8.96
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 42.87
• Enterprise Value/Market Cap: 0.95
• Enterprise Value/Revenue: 1.98
• Enterprise Value/Gross Profit: 9.66
• Enterprise Value/Ebitda: 4.50
• 1Y Price Target: $236.67
• Price Target Upside: -9.21% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 12

Paycom's strong financial performance, characterized by consistent revenue growth and high profitability, is a major driver of its overall score. The technical analysis supports a stable to slightly positive outlook, though caution is advised due to potential overbought conditions. Valuation metrics indicate a fair market price, aligning with industry standards. The positive earnings call further reinforces Paycom's strategic focus and growth potential, despite some challenges related to interest revenue and rate cuts.

Positive Factors

Product and Customer Retention

Customer support and product improvements are driving higher upsell and retention among the current base.

Revenue Trends

Paycom reported a very solid 1Q, with revenue beating by 210 bps vs the mid point of guidance, and bookings accelerating at the company.

Sales and Margin Performance

Strong sales execution, up-market traction and continued focus on internal efficiencies drove the revenue beat and margin expansion.

Negative Factors

Revenue Estimates

Estimates for FY26 were reduced primarily due to lower float revenue and interest income.

Revenue Guidance

Lower FY25 revenue guide suggests increased competition.

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 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 a strong financial position with consistent revenue growth, high profitability margins, and effective cash flow management. The company shows efficient operational and financial management, with strong returns on equity and minimal leverage risk. However, maintaining liquidity and further enhancing free cash flow conversion will be crucial to sustaining its growth trajectory and financial health.

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: 260.69
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• STOCH: Negative

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 260.69 is above the 20-day moving average (MA) of 240.38, above the 50-day MA of 224.43, and above the 200-day MA of 201.42, indicating a bullish trend. The MACD of 11.52 indicates Negative momentum. The RSI at 73.88 is Negative, neither overbought nor oversold. The STOCH value of 96.29 is Negative, 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
PAYC	80 Outperform	$15.03B	37.11	24.99%	0.58%	9.86%	-14.34%
PCTY	78 Outperform	$11.07B	50.01	19.70%	―	14.63%	17.15%
PYCR	74 Outperform	$4.09B	―	-1.66%	―	15.72%	74.59%
MANH	71 Outperform	$11.72B	54.69	89.60%	―	9.18%	14.35%
BILL	69 Neutral	$4.78B	482.28	0.97%	―	14.52%	―
DUOL	68 Neutral	$23.65B	262.58	12.06%	―	39.14%	103.72%
Sector *	60 Neutral	$11.59B	10.34	-7.15%	2.94%	7.49%	-10.88%

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.

Spark’s Take on PAYC Stock

According to Spark, TipRanks’ AI Analyst, PAYC is a Outperform.

Paycom demonstrates strong financial health with consistent revenue growth, high profitability, and effective cash flow management, which significantly contributes to its score. Technical indicators support a stable, slightly positive outlook. Valuation metrics indicate a fair market price. The earnings call highlights robust growth and strategic focus, although some risks exist with slower client growth and declining interest income. The corporate event of appointing a new CFO is positive but not impactful enough to alter the overall score.

To see Spark’s full report on PAYC stock, click here.