Paycom Software Intrinsic Value – Paycom Downgraded from Fast Growth to Mid-Teens in 90 Days

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Paycom Software ($NYSE:PAYC), Inc. (NYSE: PAYC) has seen its growth slow down dramatically in the last 90 days. After experiencing a period of rapid expansion, the company’s share price has decreased from its peak in late August to mid-teens in November. This drastic reduction of growth rate is highly notable in the industry, and stands in stark contrast to the company’s long-term history of outperformance. Paycom Software is a technology-enabled human capital management (HCM) platform that helps businesses manage their payroll, time management, hiring and talent management. The company offers several solutions to help organizations manage their workforce, including payroll, benefits administration, and talent management. The company’s sudden slowing down of growth could be attributed to several factors. The global pandemic has impacted many businesses, leading to reduced revenues and reduced workforce for many organizations. This has caused a decrease in demand for HCM services and has likely caused a decrease in revenue for Paycom.

In addition, the company’s competitors are increasing their market share which is making it difficult for Paycom to keep up with the pace of growth. The downgrade from fast growth to mid-teens within the last 90 days is highly notable and has surprised many investors. While the company’s long-term performance has been strong, the sudden decrease in growth rate is a cause for concern. It remains to be seen how the company will address the challenge and whether it will be able to regain its previous momentum.

Market Price

The stock opened at $183.5 and closed at $185.5, up by 1.9% from the previous closing price of 182.1. This is the lowest the stock has been in the past three months, and it indicates that the company has seen a slower growth rate than what investors were anticipating. Analysts believe this could be due to a variety of factors, ranging from macroeconomic headwinds to competitive pressures. It is unclear what the long-term effects of this downgrade will be, but investors should remain cognizant of any changes in the company’s outlook. Live Quote…

About the Company

Income Snapshot

Below shows the total revenue, net income and net margin for Paycom Software. More…

Cash Flow Snapshot

Below shows the cash from operations, investing and financing for Paycom Software. More…

Balance Sheet Snapshot

Below shows the total assets, liabilities and book value per share for Paycom Software. More…

Key Ratios Snapshot

Some of the financial key ratios for Paycom Software are shown below. More…

Analysis – Paycom Software Intrinsic Value

At GoodWhale, we have analyzed PAYCOM SOFTWARE‘s financials to determine the fair value of the company’s stock. Our proprietary Valuation Line has calculated the fair value of PAYCOM SOFTWARE’s share to be around $484.4. Presently, PAYCOM SOFTWARE’s stock is trading at $185.5, which is undervalued by 61.7%. This may present a good opportunity for investors to invest in the company at a discounted rate. With an expected upside of more than double, PAYCOM SOFTWARE presents a great opportunity for potential investors. More…

Peers

The competition in the human capital management software market is heating up. Paycom Software Inc is going up against some big names such as Paylocity Holding Corp, Workday Inc, and Ramco Systems Ltd. While each company has its own strengths and weaknesses, it seems that Paycom is gaining ground in the competition.

– Paylocity Holding Corp ($NASDAQ:PCTY)

Paylocity Holding Corporation provides cloud-based payroll and human capital management solutions in the United States. The company’s solutions include Paylocity Web Pay, a cloud-based payroll solution that offers a suite of tools to manage an employee’s payroll needs; Paylocity Web HR, an online human resource information management solution; Talent Management, a recruiting and performance management solution; and Paylocity Performance, a cloud-based employee performance management solution.

– Workday Inc ($NASDAQ:WDAY)

Workday Inc is a leading provider of enterprise cloud applications for finance and human resources. The company has a market cap of 38.27B as of 2022 and a return on equity of -1.84%. Workday Inc provides a suite of financial and human resources applications that are designed to help organizations manage their finances and workforce more effectively. The company’s products are used by organizations of all sizes, from small businesses to large enterprises. Workday Inc’s products are delivered through a cloud-based model, which allows organizations to access the applications from anywhere in the world and pay for only the resources they use.

– Ramco Systems Ltd ($BSE:532370)

Ramco Systems is a global enterprise software company specializing in enterprise resource planning (ERP), enterprise asset management (EAM), and aircraft maintenance, repair, and overhaul (MRO) software. The company has a market cap of 7.82 billion as of 2022 and a return on equity of -11.06%. The company’s products are used by organizations in a variety of industries, including aerospace and defense, automotive, construction and engineering, manufacturing, and logistics.

Summary

Paycom Software (PAYC) is a leading provider of cloud-based Human Capital Management (HCM) software. This significant drop has led analysts to downgrade the stock from a “buy” to a “hold”. The cause for this shift is attributed to the company’s shift from rapid revenue growth to mid-teens in just 90 days.

This has raised some concern among investors, as the company invests heavily in research and development, yet does not seem to be seeing the expected returns. While the company is still profitable and has strong cash flow, it is important to monitor the situation closely going forward.