Paycom (PAYC) AI Stock Analysis

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Paycom

(NYSE:PAYC)

Rating:78Outperform

Price Target:

$257.00

▲(16.82% Upside)

Paycom's strong financial performance and positive earnings call are the most significant factors driving the overall score. The company's strategic focus on innovation and growth, coupled with a solid financial position, outweigh concerns over valuation and technical indicators. Recent corporate events further enhance the outlook.

Positive Factors

Earnings

Paycom reported better than expected 2Q results, with revenue of $484mn versus Consensus $472mn, citing strong new logo additions and increasing platform adoption as main factors driving growth.

Financial Performance

Strong EBITDA margin of 41%, up 450bps YoY, helped drive EPS outperformance at $2.06 versus Consensus’ $1.78, reflecting strong cost discipline and operating leverage in the business model.

Product Strategy

The company's product strategy, including the IWant product launch and AI investments, supports increased automation.

Negative Factors

Free Cash Flow

FCF estimates being revised lower as well as uncertainty regarding the outlook for capex spend & relative valuation vs. comps being an overhang for shares.

Growth Visibility

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

Macroeconomic Uncertainty

Risks to this year include 2H seasonality, macro uncertainty, and the potential for rate cuts, all of which could create headwinds for topline growth.

Paycom (PAYC) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$13.15B

Dividend Yield0.66%

Average Volume (3M)636.90K

Price to Earnings (P/E)30.7

Beta (1Y)0.58

Revenue Growth10.21%

EPS Growth-10.56%

CountryUS

Employees7,306

SectorTechnology

Sector Strength89

IndustrySoftware - Application

Share Statistics

EPS (TTM)2.06

Shares Outstanding57,876,797

10 Day Avg. Volume590,771

30 Day Avg. Volume636,899

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)N/A

P/FCF RatioN/A

Enterprise Value/Market Cap0.96

Enterprise Value/Revenue6.44

Enterprise Value/Gross Profit7.81

Enterprise Value/Ebitda17.28

Forecast

1Y Price Target

$248.11

Price Target Upside12.78% Upside

Rating ConsensusHold

Number of Analyst Covering12

Paycom Business Overview & Revenue Model

Company DescriptionPaycom Software, Inc. is a leading provider of comprehensive cloud-based human capital management (HCM) software solutions for businesses in the United States. Founded in 1998, the company offers an array of services including payroll processing, talent acquisition, benefits administration, time and labor management, and HR management. Paycom targets a diverse clientele, ranging from small businesses to large enterprises, providing them with innovative technology to streamline their HR and payroll processes.

How the Company Makes MoneyPaycom generates revenue primarily through a subscription-based model for its software solutions. The company charges clients a fee based on the number of employees they manage through the system, creating a scalable revenue stream that grows as clients expand their workforce. Key revenue streams include software licensing fees, payroll processing fees, and additional charges for various HR services such as talent acquisition and employee management tools. Significant partnerships with various organizations and ongoing investments in product development also contribute to Paycom's earnings by enhancing its service offerings and maintaining a competitive edge in the HCM market.

Paycom Key Performance Indicators (KPIs)

Any

Client Count

Client Count
Shows the number of clients using Paycom's services, indicating market penetration and potential for future revenue growth.

Chart InsightsPaycom's client count has shown modest growth, reaching approximately 37,500 by the end of 2024, reflecting a slower growth rate of 2% year-over-year. Despite this, the company is experiencing strong revenue growth and record sales, driven by innovative products and operational efficiencies. The focus on automation and expansion of sales teams suggests strategic efforts to boost client acquisition. However, the slower client growth remains a concern, potentially impacting future revenue streams if not addressed.

Data provided by:

Main Street Data

Paycom Earnings Call Summary

Earnings Call Date:Aug 06, 2025

(Q2-2025)

% Change Since: |

Next Earnings Date:Nov 04, 2025

Earnings Call Sentiment Positive

The earnings call was largely positive with significant revenue growth, the successful launch of a groundbreaking AI product, and improved profitability. While there were concerns over declining interest revenue and increased spending, the overall outlook remains strong.

Q2-2025 Updates

Positive Updates

Strong Revenue Growth

Total revenue reached $484 million, representing an 11% increase over the prior year period. Recurring and other revenue grew even faster at 12% year-over-year, reaching $455 million.

Introduction of IWant

Paycom launched IWant, a command-driven AI tool that revolutionizes user access and navigation of the system, increasing user engagement and client satisfaction. Early feedback from clients has been overwhelmingly positive, calling it a 'game changer.'

Increased Profitability

Non-GAAP net income for the second quarter increased 27% year-over-year to $117 million. Adjusted EBITDA was $198 million, reflecting a 24% increase over the prior year, with an adjusted EBITDA margin of 41%, up 450 basis points.

Strong Financial Position

Paycom ended the quarter with $532 million in cash and no debt. The average daily balance on funds held for clients was approximately $2.6 billion, up 10% over the prior year period.

Recognition and Awards

Paycom's sales teams were recognized by Selling Power magazine, and the company was listed by Time Magazine and Newsweek for various accolades such as best companies and best online platforms.

Negative Updates

Decline in Interest Revenue

Interest on funds held for clients declined 11% year-over-year to approximately $28 million, with expectations of further decline due to anticipated rate cuts.

Increased CapEx and Marketing Spend

Paycom anticipates increased capital expenditures related to AI and IWant product launch. Marketing and R&D budgets are also expected to increase, potentially impacting free cash flow margins similar to last year.

Company Guidance

During the Paycom Second Quarter 2025 Financial Results Conference Call, the company provided substantial guidance metrics reflecting strong performance and future outlook. Total revenue for the second quarter reached $484 million, marking an 11% increase year-over-year. Recurring and other revenue grew by 12% to $455 million. The GAAP net income was reported at $89 million, or $1.58 per diluted share, while non-GAAP net income increased by 27% year-over-year to $117 million, or $2.06 per diluted share. Adjusted EBITDA rose 24% to $198 million, with an adjusted EBITDA margin of 41%, a 450 basis point increase from the previous year. Paycom ended the quarter with $532 million in cash and no debt, and the average daily balance on funds held for clients was $2.6 billion, up 10% year-over-year. Looking ahead, Paycom raised its full-year 2025 revenue guidance to between $2.45 billion and $2.55 billion, anticipating a 9% year-over-year increase at the midpoint. Recurring and other revenue is expected to grow by 10% year-over-year. The company projects adjusted EBITDA for the full year to be between $872 million and $882 million, with a margin of approximately 43% at the midpoint.

Paycom Financial Statement Overview

Summary

Paycom demonstrates strong financial performance with significant revenue and profit growth, efficient cost management, and robust cash flow generation. The low debt-to-equity ratio and high return on equity further reinforce its financial stability, although the relatively low equity ratio poses a potential risk.

Income Statement

Very Positive

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

Very Positive

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

Very Positive

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	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	1.96B	1.88B	1.69B	1.38B	1.06B	841.43M
Gross Profit	1.62B	1.55B	1.42B	1.16B	893.64M	717.89M
EBITDA	730.55M	798.30M	588.20M	484.80M	323.18M	239.33M
Net Income	415.78M	502.00M	340.79M	281.39M	195.96M	143.45M
Balance Sheet
Total Assets	4.03B	5.86B	4.20B	3.90B	3.22B	2.61B
Cash, Cash Equivalents and Short-Term Investments	532.20M	402.00M	294.00M	400.73M	277.98M	151.71M
Total Debt	81.20M	83.40M	75.90M	29.00M	29.16M	30.89M
Total Liabilities	2.23B	4.28B	2.89B	2.72B	2.32B	1.95B
Stockholders Equity	1.80B	1.58B	1.30B	1.18B	893.71M	655.64M
Cash Flow
Free Cash Flow	359.20M	341.00M	288.21M	228.31M	193.17M	133.10M
Operating Cash Flow	558.17M	533.90M	485.04M	365.10M	319.36M	227.21M
Investing Cash Flow	-659.08M	-22.20M	-196.71M	-23.29M	-257.67M	-117.88M
Financing Cash Flow	-860.75M	1.11B	-274.66M	254.59M	165.72M	-165.91M

Paycom Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price220.00

Price Trends

50DMA

228.11

Negative

100DMA

234.19

Negative

200DMA

224.41

Positive

Market Momentum

MACD

-0.62

Negative

RSI

49.80

Neutral

STOCH

44.37

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 220 is below the 20-day moving average (MA) of 225.07, below the 50-day MA of 228.11, and below the 200-day MA of 224.41, indicating a neutral trend. The MACD of -0.62 indicates Negative momentum. The RSI at 49.80 is Neutral, neither overbought nor oversold. The STOCH value of 44.37 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for PAYC.

Paycom Risk Analysis

Paycom disclosed 37 risk factors in its most recent earnings report. Paycom reported the most risks in the "Finance & Corporate" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Paycom Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PAYC	78 Outperform	$13.15B	30.73	25.76%	0.66%	10.21%	-10.56%
DAY	76 Outperform	$11.01B	229.81	1.89%	―	13.46%	2.06%
CVLT	75 Outperform	$8.30B	104.03	25.08%	―	21.62%	-53.99%
PCTY	75 Outperform	$9.89B	44.62	20.04%	―	13.74%	10.99%
PRCH	62 Neutral	$1.77B	36.57	75.95%	―	-7.41%	―
Sector *	61 Neutral	$35.45B	7.89	-10.11%	1.88%	8.47%	-9.45%
KC	51 Neutral	$4.22B	―	-31.02%	―	20.42%	-9.39%

* Technology Sector Average

Performance Comparison

PAYC

Paycom

220.00

59.75

37.29%

CVLT

CommVault Systems

186.64

37.51

25.15%

PCTY

Paylocity

174.54

12.04

7.41%

DAY

Dayforce Inc

69.50

13.96

25.14%

Kingsoft Cloud Holdings

13.90

11.67

523.32%

PRCH

Porch Group

16.97

15.70

1236.22%

Paycom Corporate Events

Executive/Board ChangesBusiness Operations and Strategy

Paycom Announces Executive Team Changes on August 18

Positive

Aug 18, 2025

On August 18, 2025, Paycom announced significant changes in its executive team, including the promotion of Shane Hadlock to Chief Client Officer and Chief Technology Officer, and Rachael Gannon to Chief Automation Officer. Brad Smith will transition to Senior Technical Strategist after resigning as Chief Information Officer on October 31, 2025. These changes aim to enhance Paycom’s technical capabilities and product strategy, focusing on client ROI and innovation. Hadlock and Gannon’s extensive experience within the company positions them to drive further growth and automation, while Smith’s new role will continue to leverage his expertise in innovative solutions.

Dividends

Paycom Declares Quarterly Cash Dividend Announcement

Positive

Aug 4, 2025

On August 4, 2025, Paycom Software, Inc. announced that its Board of Directors declared a regular quarterly cash dividend of $0.375 per share of common stock. This dividend will be paid on September 8, 2025, to stockholders of record as of August 25, 2025. This announcement reflects Paycom’s ongoing commitment to returning value to its shareholders and may enhance its attractiveness to investors.

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Aug 29, 2025