Paycom Software, Inc. (PAYC) stock analysis

P/E below its 5-year median

Paycom Software's P/E of 23.3 is below its own 5-year median of 32.0.

P/E below the industry

Paycom Software's P/E of 23.3 is below the Computer Programming, Data Processing, and Other Computer Related Services median of 27.6.

EV/EBITDA below its 5-year median

Paycom Software's EV/EBITDA of 13.0 is below its 5-year median of 18.6.

P/B above the industry

Paycom Software's price-to-book of 15.46 is above the Computer Programming, Data Processing, and Other Computer Related Services median of 3.32.

Trading below fair value

The share price of $242.66 is below our fair value estimate of $331.20.

Margin of safety over 20%

The price is 26.7% below fair value, more than the 20% cushion we look for.

Revenue growing 10%+ a year

Revenue grew 14.3% a year over the last three fiscal years.

EPS growing 10%+ a year

Diluted EPS grew 18.6% a year over the last three fiscal years.

Earnings growth not accelerating

Net income grew 12.6% over the last twelve months, against a 5-year average of 25.9% a year.

Growing slower than the industry

Revenue grew 9.5% over the last twelve months; the Computer Programming, Data Processing, and Other Computer Related Services median is 9.6%.

Guidance lowered

Paycom Software lowered its year ending December 31, 2026 Interest on funds held for clients outlook on Aug 5, 2026.

Gross margin improving

Gross margin was 84.0% over the last twelve months, against 82.9% a year earlier.

Return on equity over 15%

Return on equity was 42.2% over the last twelve months and averaged 28.4% over five years.

Return on capital over 10%

Return on invested capital was 40.1%, above the 10% that usually covers the cost of capital.

Return on equity above the industry

Paycom Software's return on equity of 42.2% is above the Computer Programming, Data Processing, and Other Computer Related Services median of -1.2%.

Earnings grew over 5 years

Net income grew 25.9% a year on average over the last five fiscal years.

Net margin above its 5-year average

Net margin was 23.3% over the last twelve months, against a 5-year average of 21.6%.

Net margin above the industry

Paycom Software's net margin of 23.3% is above the Computer Programming, Data Processing, and Other Computer Related Services median of -4.8%.

High debt

Debt is 106% of shareholders' equity, above the 40% we consider low.

Debt rising against equity

Debt to equity rose from 4.7% five years ago to 106%.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 108% of total debt.

Interest well covered

Operating income covers interest expense 27.2 times.

Short-term assets cover short-term debts

Current assets are 1.06 times current liabilities.

Bankruptcy risk in the grey zone

The Altman Z-score is 2.62; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Paycom Software paid dividends worth 0.6% of the share price over the last twelve months.

Yield below Treasuries

The 0.6% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; Paycom Software yields 0.6%.

Dividend stability

Fewer than five years of dividend history.

Covered by earnings

Dividends take 14.3% of net income.

Covered by free cash flow

Dividends take 11.1% of free cash flow.