Paycom Software, Inc. Fundamental Analysis (NYSE: PAYC)
Paycom Software, Inc. (NYSE: PAYC) shows strong financial fundamentals with a PE ratio of 24.15, profit margin of 22.78%, and ROE of 40.43%. The company generates $2.1B in annual revenue with moderate year-over-year growth of 8.95%.
Key Strengths
Areas of Concern
The stock receives a Fundamental Health Score of 67.1/100 based on profitability, valuation, growth, and balance sheet metrics. The C+ grade reflects average fundamentals, with notable risks in certain areas.
Fundamental Health Score
We analyze PAYC's fundamental strength across five key dimensions:
Efficiency Score
WeakPAYC struggles to generate sufficient returns from assets.
Valuation Score
ExcellentPAYC trades at attractive valuation levels.
Growth Score
ModeratePAYC shows steady but slowing expansion.
Financial Health Score
ModeratePAYC shows balanced financial health with some risks.
Profitability Score
ExcellentPAYC achieves industry-leading margins.
Key Financial Metrics
Is PAYC Expensive or Cheap?
P/E Ratio
PAYC trades at 24.15 times earnings. This indicates a fair valuation.
PEG Ratio
When adjusting for growth, PAYC's PEG of 0.89 indicates potential undervaluation.
Price to Book
The market values Paycom Software, Inc. at 18.25 times its book value. This suggests the stock is fully valued or overvalued on an asset basis.
EV/EBITDA
Enterprise value stands at 10.55 times EBITDA. This signals the market has high growth expectations.
How Well Does PAYC Make Money?
Net Profit Margin
For every $100 in sales, Paycom Software, Inc. keeps $22.78 as profit after all expenses.
Operating Margin
Core operations generate 30.30 in profit for every $100 in revenue, before interest and taxes.
ROE
Management delivers $40.43 in profit for every $100 of shareholder equity.
ROA
Paycom Software, Inc. generates $9.37 in profit for every $100 in assets, demonstrating efficient asset deployment.
Following the Money - Real Cash Generation
Operating Cash Flow
Paycom Software, Inc. generates strong operating cash flow of $996.00M, reflecting robust business health.
Free Cash Flow
Paycom Software, Inc. generates strong free cash flow of $742.50M, providing ample flexibility for dividends, buybacks, or growth.
FCF Per Share
Each share generates $16.47 in free cash annually.
FCF Yield
PAYC converts 7.34% of its market value into free cash.
Financial Ratios Analysis
Valuation Ratios
P/E Ratio
Price to earnings ratio
24.15
vs 25 benchmark
PEG Ratio
Price/earnings to growth ratio
0.89
vs 25 benchmark
P/B Ratio
Price to book value ratio
18.25
vs 25 benchmark
P/S Ratio
Price to sales ratio
4.80
vs 25 benchmark
Financial Health
Debt/Equity
Total debt to shareholders' equity
1.72
vs 25 benchmark
Current Ratio
Current assets to current liabilities
1.07
vs 25 benchmark
Efficiency Ratios
ROE
Return on equity percentage
0.40
vs 25 benchmark
ROA
Return on assets percentage
0.09
vs 25 benchmark
ROCE
Return on capital employed
0.33
vs 25 benchmark
How PAYC Stacks Against Its Sector Peers
| Metric | PAYC Value | Sector Average | Performance |
|---|---|---|---|
| P/E Ratio | 24.15 | 34.40 | Better (Cheaper) |
| ROE | 40.43% | 730.00% | Weak |
| Net Margin | 22.78% | -3112.00% (disorted) | Strong |
| Debt/Equity | 1.72 | 0.22 | Weak (High Leverage) |
| Current Ratio | 1.07 | 6.05 | Neutral |
| ROA | 9.37% | 256.00% | Weak |
PAYC outperforms its industry in 2 out of 6 key metrics, particularly excelling in Net Margin, but lagging in ROE.
Historical Growth Performance
5-Year Growth Trajectory
This section reviews Paycom Software, Inc.'s 5-year compound annual growth rate (CAGR) and compares its performance against the typical investment style of its industry.
Revenue CAGR
151.79%
Industry Style: Growth, Innovation, High Beta
High GrowthEPS CAGR
226.37%
Industry Style: Growth, Innovation, High Beta
High GrowthFCF CAGR
208.55%
Industry Style: Growth, Innovation, High Beta
High Growth