Stock (Symbol) |
Paycom Software (PAYC) |
Stock Price |
$51 |
Sector |
| Technology |
Data is as of |
| August 14, 2016 |
Expected to Report |
| Nov 1 – 7 |
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 a complete cloud-based HR program that human resource personnel can log into online to process payroll and benefits for employees. Paycom 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 for you. PAYC has been on fire as profit growth has accelerated from 60% to 67%, 175% and 110% during the last 4 qtrs. Two qtrs ago PAYC beat the 19 cent profit estimate by 14 cents, and last qtr it beat the 13 cent estimate by 8 cents. That’s just incredible — as is PAYC’s 51% Estimated Long Term Growth Rate. The only negatives are PAYC has a P/E in the 60s and the stock’s doubled since its lows set back in Jan/Feb when the market was in a wicked correction. I’m waiting on Paycom to come back to around $40 before I buy in. In the meantime I also hold a similar company, Ultimate Software (ULTI), in the Growth Portfolio. |
One Year Chart |
 That’s impressive to go from 60% profit growth to triple-digit growth. Last qtr the company reported 110% profit growth on 51% sales growth as profit margins increased 1% to 84%. 2016 profit estimates have now increased from $0.52 to $0.53, $0.67 and $0.77 the past 4 qtrs. So basically Paycom is expected to make 48% more than we thought they would make a year ago. What’s not great is qtrly profit estimates call for 38%, 10%, 9% and 14% profit growth the next 4 qtrs. PAYC has crushed estimates the past 2 qtrs so it’s likely these figures will come in better than expected. Still, I would like to see better estimates when you’re sporting a 66 P/E. |
Fair Value |
 For a while now I’ve felt PAYC is worth 65x earnings. The stock is fairly valued here in my eyes with decent upside to 2017. But if we got the stock in the $40s it would be a better deal. |
Bottom Line |
 Paycom Software is clicking on all cylinders right now. But with a P/E of 66 this stock could be in for a deep correction if the market were to turn down (as what happened in January/February). This would be a great addition to my Growth Portfolio if the stock were to dip down to like $40. I have this stock on my radar. I also hold a similar company in Ultimate Software so I can be a little more patient and wait for PAYC to come down to my asking price. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
