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Paycom (PAYC)
NYSE:PAYC

Paycom (PAYC) AI Stock Analysis

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Paycom

(NYSE:PAYC)

78Outperform
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 reported revenue of $494M vs consensus expectation of $481M, reflecting a ~$13M beat, as the company pointed to strong sales execution and some incremental payroll runs.
International expansion
International growth remains an attractive opportunity with expansion into countries like Canada, Mexico, Ireland, and the U.K.
Sales execution
The recent opening of three new sales offices is viewed as a good sign for demand and maturation of the sales organization.
Negative Factors
Customer growth
Paycom's net customer count declined by 59 to 19.4K, compared to an increase of 400 in the previous year.
Revenue guidance
Lower FY25 revenue guide suggests increased competition.

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

Paycom Business Overview & Revenue Model

Company DescriptionPaycom 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 MoneyPaycom 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
89
Very Positive
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
78
Positive
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
85
Very Positive
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 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
1.88B1.69B1.38B1.06B841.43M
Gross Profit
1.55B1.42B1.16B893.64M717.89M
EBIT
634.30M451.32M378.68M253.57M186.12M
EBITDA
798.30M503.37M424.08M284.29M239.33M
Net Income Common Stockholders
502.00M340.79M281.39M195.96M143.45M
Balance SheetCash, Cash Equivalents and Short-Term Investments
402.00M294.02M400.73M277.98M151.71M
Total Assets
5.86B4.20B3.90B3.22B2.61B
Total Debt
83.40M75.95M29.00M29.16M30.89M
Net Debt
-318.60M-218.08M-371.73M-248.82M-120.82M
Total Liabilities
4.28B2.89B2.72B2.32B1.95B
Stockholders Equity
1.58B1.30B1.18B893.71M655.64M
Cash FlowFree Cash Flow
341.00M288.21M228.31M193.17M133.10M
Operating Cash Flow
533.90M485.04M365.10M319.36M227.21M
Investing Cash Flow
-22.20M-196.71M-23.29M-257.67M-117.88M
Financing Cash Flow
1.11B-274.66M254.59M165.72M-165.91M

Paycom Technical Analysis

Technical Analysis Sentiment
Neutral
Last Price210.22
Price Trends
50DMA
212.22
Negative
100DMA
214.68
Negative
200DMA
190.33
Positive
Market Momentum
MACD
2.59
Negative
RSI
55.33
Neutral
STOCH
48.78
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 210.22 is below the 20-day moving average (MA) of 214.72, below the 50-day MA of 212.22, and above the 200-day MA of 190.33, indicating a neutral trend. The MACD of 2.59 indicates Negative momentum. The RSI at 55.33 is Neutral, neither overbought nor oversold. The STOCH value of 48.78 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 (57)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
78
Outperform
$12.51B24.5034.88%0.78%11.19%51.03%
75
Outperform
$9.77B44.3020.49%15.96%31.76%
72
Outperform
$8.89B40.9575.64%12.23%24.66%
68
Neutral
$4.09B-1.66%15.72%74.59%
65
Neutral
$4.08B403.522.11%16.42%
65
Neutral
$15.26B182.6711.97%40.84%437.52%
57
Neutral
$20.31B10.03-14.49%2.79%5.15%-23.76%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
PAYC
Paycom
210.22
7.30
3.60%
MANH
Manhattan Associates
157.64
-82.02
-34.22%
PCTY
Paylocity
183.78
14.51
8.57%
BILL
Bill.com Holdings
43.99
-20.13
-31.39%
PYCR
Paycor HCM
22.49
4.49
24.94%
DUOL
Duolingo
316.94
100.54
46.46%

Paycom Earnings Call Summary

Earnings Call Date: Feb 12, 2025 | % Change Since: 1.71% | Next Earnings Date: May 6, 2025
Earnings Call Sentiment Positive
The earnings call reflects a generally positive outlook with strong revenue growth, record sales, and notable product achievements. However, there are areas of concern, such as slower client growth and a decline in expected interest income. Overall, the company's financial performance and strategic initiatives suggest a positive sentiment moving forward.
Highlights
Strong Revenue Growth
Paycom reported full-year 2024 revenue of $1.88 billion, representing 11% organic growth compared to 2023. Fourth-quarter revenue was $494 million, representing growth of approximately 14% over the prior year period.
Record Sales and Expansion
Paycom experienced record-breaking sales in January and opened three new sales offices in Raleigh, Los Angeles, and Providence, expanding their total outside sales teams to 57.
Innovative Product Achievements
Automation solutions like Beti and GONE continue to drive significant ROI for clients, with some clients reducing payroll processing time by 85%. GONE received an Innovation Award from The Business Intelligent Group.
Operational Efficiency Gains
Paycom achieved a full-year adjusted EBITDA margin of 41.2% and a fourth-quarter margin of 43.5%, up 290 basis points year-over-year. Free cash flow was $337 million, up 17% year-over-year.
Strong Balance Sheet
Paycom ended the year with $402 million in cash and zero debt, maintaining a solid financial position.
Lowlights
Slower Client Growth
Paycom's total client growth rate was 2% compared to 2023, with approximately 37,500 clients at the end of 2024.
Interest Income Decline
Interest on funds held for clients is expected to be $110 million in 2025, down 12% year-over-year.
Stagnant Revenue Retention
Paycom's annual revenue retention rate remained constant at 90% for 2024, similar to 2023.
Company Guidance
During the Paycom earnings call for the fourth quarter and full year 2024, the company provided guidance for fiscal year 2025, projecting total revenue between $2.015 billion and $2.035 billion, marking an approximate 8% year-over-year increase. The expected recurring and other revenue growth is around 9% year-over-year, while interest on funds held for clients is anticipated to be approximately $110 million, down 12% from the previous year. Adjusted EBITDA is forecasted to be between $820 million and $840 million, reflecting a margin of 41% at the midpoint. The company plans to maintain a focus on automation, research and development, and sales to fuel momentum and enhance operational efficiencies.

Paycom Corporate Events

Executive/Board ChangesBusiness Operations and Strategy
Paycom Names Bob Foster as New CFO
Positive
Feb 12, 2025

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.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

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.