Reasonable Price-to-Earnings Ratio
Strong Price-to-Sales Ratio
High Gross Profit Margin
Strong Return on Equity
Low Debt Levels
Strong Interest Coverage
🚀 Strong Competitive Position
💡 Innovative Product Development
📈 Operational Efficiency
🌟 Positive Revenue Guidance
🔍 Focus on Automation
📊 Strong Sales Performance
High Price-to-Cash Flow Ratio
Moderate Net Profit Margin
Low Cash Ratio
🔄 Slower Client Growth
🕰️ Q1 Growth Expectations
Overall, Paycom demonstrates strong business quality through its competitive advantages in automation and operational efficiency, although client growth has slowed. Future prospects appear promising with positive revenue guidance and a focus on enhancing product offerings, despite some short-term growth expectations.
Analysis Date: February 12, 2025
Last Updated: March 12, 2025
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Benjamin Graham's value investing approach focuses on finding stocks with a significant margin of safety between their intrinsic value and market price.
Intrinsic Value
Estimated fair value based on Graham's formula
$345.77
Current Market Price: $202.95
IV/P Ratio: 1.70x (>1.0 indicates undervalued)
Margin of Safety
Gap between intrinsic value and market price
41.0%
Graham recommended a minimum of 20-30% margin of safety
Higher values indicate a greater potential discount to fair value
Graham Criteria Checklist
Benjamin Graham's value investing checklist for PAYC
Positive earnings (5+ years)
Dividend history (5+ years)
P/E ratio ≤ 20 (22.06)
P/B ratio ≤ 1.5 (7.03)
Current ratio ≥ 2.0 (1.10x)
Long-term debt < Net current assets (0.16x)
Margin of safety (41.0%)
PAYC does not meet all Graham criteria
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
A gross profit margin of 78.63% indicates that PAYC retains a significant portion of revenue after direct costs, demonstrating strong pricing power and operational efficiency.
With a return on equity of 34.01%, PAYC shows effective use of shareholders' equity to generate profits, indicating strong management performance.
While a net profit margin of 26.66% is solid, it may be lower than some peers, suggesting room for improvement in cost management or pricing strategies.
Profitability metrics measure a company's ability to generate earnings relative to its revenue, operating costs, and other relevant metrics. Higher values generally indicate better performance.
Return on Equity (ROE)
Measures how efficiently a company uses its equity to generate profits
34.01%
Higher values indicate better returns for shareholders
TTM (as of 2025-04-16)
Return on Assets (ROA)
Measures how efficiently a company uses its assets to generate profits
1.94%
Higher values indicate better asset utilization
TTM (as of 2025-04-16)
Gross Profit Margin
Percentage of revenue retained after accounting for cost of goods sold
78.63%
Higher values indicate better efficiency in production
TTM (as of 2025-04-16)
Net Profit Margin
Percentage of revenue retained after accounting for all expenses
26.66%
Higher values indicate better overall profitability
TTM (as of 2025-04-16)
The debt-to-equity ratio of 0.05 indicates that PAYC has a very low level of debt compared to equity, reflecting a conservative approach to financing and lower financial risk.
An interest coverage ratio of 186.57 suggests that PAYC can easily meet its interest obligations, indicating excellent financial stability.
A cash ratio of 0.103 indicates that PAYC may not have sufficient cash to cover its short-term liabilities, which could be a liquidity concern.
Financial health metrics assess a company's ability to meet its financial obligations and its overall financial stability.
Debt to Equity Ratio
Total debt divided by total equity
0.05x
Lower values indicate less financial leverage and risk
Less than 1.0 is conservative, 1.0-2.0 is moderate, >2.0 indicates high risk
Q4 2024
Current Ratio
Current assets divided by current liabilities
1.10x
Higher values indicate better short-term liquidity
Less than 1.0 is concerning, 1.0-2.0 is adequate, greater than 2.0 is good
Q4 2024
Paycom has established itself as a leader in the payroll and HR software industry with the most automated solutions. The focus on automation through products like Beti and GONE enhances client ROI and reduces unproductive time.
The company is heavily investing in R&D, with adjusted R&D expenses at $61 million in Q4 2024, which is 12% of total revenue. This commitment to innovation positions Paycom to continue leading in automation and client satisfaction.
Paycom has realized operational efficiencies, evidenced by a 25% reduction in service tickets and maintaining headcount while improving service delivery.
Despite strong revenue growth, Paycom experienced only a 2% increase in total clients, indicating that client acquisition may be slowing down.
For 2025, Paycom expects revenue growth of approximately 8% year-over-year, with recurring and other revenue projected to grow by about 9%. This outlook reflects confidence in the company's sales momentum and market demand.
Paycom's commitment to full solution automation and AI integration positions it well for future growth. The introduction of automation tools is expected to enhance client interactions and operational efficiencies.
The company reported record sales growth and opened three new sales offices, indicating a proactive approach to expanding market reach and capturing new client segments.
Guidance indicates that Q1 growth will be the low point of the year. This suggests there may be short-term challenges that could impact overall annual performance.