Thursday, March 10, 2022

A Small Cap Equity holding: Paycom Software, Inc. (PAYC, $324.45): “Paycom Is Paying Off” By: Richard Zaro, AIM Student at Marquette University

 Paycom Software, Inc. (PAYC, $324.45): “Paycom Is Paying Off”

By: Richard Zaro, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it, and I have no business relationship with any company whose stock is mentioned in this article.


  • Paycom Software, Inc. (NYSE: PAYC) Paycom Software, Inc. provides comprehensive, cloud-based human capital management (HCM) software solutions. The Software-as-a-Service platform provides functionality and data analytics that businesses need to manage the complete employment life cycle from recruitment to retirement.
  • Its solutions require virtually no customization and is based on a core system of record maintained in a single database for all HCM functions, including talent acquisition, time and labor management, payroll, talent management and human resources management applications.
  • PAYC recently reported earnings in which they outpaced their own guidance for fiscal ’21.
  • For each of the years ended December 31, 2021, 2020, and 2019, PAYC’s gross margin was approximately 85%. Management has detailed that it expects its gross margin to remain relatively consistent in future periods.

Key points

Paycom Software, Inc. has shown exceptional growth over the past year. Revenue growing over 25% to $1.04 Billion year over year. With an increasing market presence and growth of the companies it serves, PAYC should see continued revenue growth and continued demand for its human capital management software.

Management indicates that it plans to continue to grow PAYC by growing its client base to include larger companies. Paycom believes larger employers represent a substantial opportunity to increase the number of potential clients and to increase our revenues per client, with limited incremental costs.

Paycom Software, Inc. expects to have its 2022-year end revenue be about $1.3 billion, an approximate 25% growth for the year. This substantial growth rate has been partially due to increasing market share and an overall growth in the industry and the need for human capital management software.

Paycom Software, Inc. also has been continuing to repurchase its shares. During the year ended December 31, 2021, Paycom repurchased an aggregate of 163,849 shares of common stock at an average cost of $400.24 per share. Paycom will continue to repurchase its shares until their stock repurchase plan expires on May 13, 2023.

What has the stock done lately?

Over the past month, PAYC has dropped about 3.22% while the Russell 2000 Index has dropped about 2.22%. The stock’s value has ranged from $300.98 to $364.94. The stock price has seen a decline since 2/17 after its earnings were released. The current price is hovering around $320.00 which is about ~13% off its month high.

Past Year Performance: SPSC has decreased 15.05% in value over the past year, trading at a high of about $558.97 in November 2021 and currently trading around $320.00. In the past year, the stock has had a bull run that was put to an end in November, and it has been beginning to stabilize just these past few weeks.

Source: FactSet

My Takeaway

Since being added to the AIM fund, PAYC has exceeded its expectations. The increased demand for human capital management software, the growth of the companies that PAYC serves, and an overall need for solutions all benefit PAYC’s business. Management placing an emphasis on growing the company and seeing revenue estimates continue to rise make PAYC a strong investment. Although recent drops in share price make Paycom a daunting investment, strong fundamentals show that it is an extremely strong company doing better than ever. It is recommended that the AIM fund continues to hold their PAYC position.

Source: FactSet