Paycom Software, Inc. (PAYC, $324.45): “Paycom Is Paying Off”
By: Richard
Zaro, AIM Student at Marquette University
Summary
- 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.
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.
