Stock (Symbol) |
Paycom Software (PAYC) |
Stock Price |
$56 |
Sector |
| Technology |
Data is as of |
| March 17, 2017 |
Expected to Report |
| May 1 – 5 |
Company Description |
 Paycom Software, Inc. is a provider of cloud-based HCM software solution delivered as SaaS. The Company’s solution requires no customization and is -based on a core system of record maintained in a single database for all HCM functions. Talent acquisition includes applicant tracking, candidate tracker, background checks, on-boarding, e-verify & tax credit services. Time & labor management includes time and attendance, scheduling/schedule exchange, time-off requests, labor allocation & labor management reports/push reporting. Payroll includes payroll & tax management, Paycom pay, expense management and garnishment management. Talent management includes employee self-service, compensation budgeting, performance management, executive dashboard & Paycom learning. HR management includes document and task management, government and compliance, benefits, COBRA, personnel action forms, surveys and ACA dashboard. Source: Thomson Financial |
Sharek’s Take |
 Paycom Software (PAYC) has been on the roll the past year as profits have more than doubled. But what impresses me most is the degree in which the company has been beating the street. Going into earnings the past 4 qtrs, analysts have expected profit growth of 58%, 30%, 38% and 20%. The company has instead delivered growth of 175%, 110%, 88% and 80%. Paycom offers a complete cloud-based HR program for small and medium sizes businesses that human resource personnel can log into online to process payroll and benefits for employees. This software makes it easy to do talent acquisition and background checks, to payroll and time-off requests, as well compliance tasks such as government registrations, benefits administration, COBRA and retirement. It even figures out the Affordable Care Act (and this is 3% of revenue). PAYC was expected to have a slow-down in growth now that Obamacare has been implemented, but small businesses are continuing to go digital with Human Resources, including three new clients with 3200, 3500 and 8000 employees. The company also boasts a 91% client retention rate. Paycom had $55 million in free-cash flow last year and just initiated a $50 million stock buyback program on top of the $50 million one it had in 2016. Overall this continues to be one of the top stocks on the market, and I feel its deserving of a premium valuation of 60x earnings which equates to Fair Values of $61 this year and $80 in 2018. |
One Year Chart |
 This chart looks amazing, but a year ago the stock was low as things were kinda crazy as the stock market was on the verge of crashing due to International selling. And, although PAYC looks high the P/E of 55 is reasonable for this stock. Last qtr the company delivered 35% sales growth and a profit of $0.18 vs. $0.10, and beat the $0.12 estimate. Estimates are for 24%, 5%, 27% and 6% profit growth the next 4 qtrs. Impressive Est. LTG of 49% per year. |
Fair Value |
 Wow, a 49% Est. LTG? That would be amazing if Paycom could grow profits that rapidly. PAYC’s impressive growth makes it deserving of a 60 P/E, putting the Fair Value at $61. The stock is already up 24% this year and that’s taken away some of the upside. |
Bottom Line |
 Paycom Software continues to fly higher as the company attracts new clients while keeping 9/10ths of the old ones. With the stock at its highs for the year, 2017’s potential isn’t as good as it was last qtr, but this is still an amazing stock and I’d love to see where it is 5-10 years from now. PAYC ranks 19th of 31 stocks in the Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
19 of 31Aggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
