A Look At Paycom (PAYC) Valuation After Strong Q1 Earnings And Capital Return Moves

Simply Wall St.

May 19

AdvertisementWhy Paycom’s latest earnings and capital moves matter for shareholders Paycom Software (PAYC) has drawn fresh attention after reporting first quarter results with higher sales and net ...

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See our latest analysis for Paycom Software. That mix of solid first quarter results, reaffirmed full year guidance, active buybacks, and a fresh dividend has helped the stock post a 9.65% 1 month share price return and 13.78% 3 month share price return. However, the 1 year total shareholder return is still down 46.02%, so recent momentum is rebuilding off a weaker long term base. If Paycom’s AI enabled HR platform has caught your eye, it can be useful to widen the lens and see what else is out there with our screener of 62 profitable AI stocks that aren't just burning cash So with Paycom trading below some analysts’ price targets and carrying a value score of 5 after a sharp multi year share price decline, is the stock now undervalued, or is the market already pricing in future growth? Most Popular Narrative: 46.6% Undervalued According to the most followed narrative on Paycom, a fair value of $260.61 sits well above the last close at $139.18, framing a wide valuation gap that depends on how recurring revenue and margins develop. New Recurring Revenue is strongly correlated (0.95 R Squared) to Sales and Marketing Expense from the preceding year. We can gauge whether New RR will grow based on the growth in Sales and Marketing Expense. Read the complete narrative. Want to see what kind of recurring revenue build and margin profile can support that higher fair value, and how much weight is placed on Beti’s rollout and enterprise push across thousands of clients? The full narrative lays out those assumptions in detail and connects today’s share price with that $260.61 view. Result: Fair Value of $260.61 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, this hinges on Beti adoption translating into stronger recurring revenue and retention, as well as on sales and marketing spend supporting that without pressuring margins. Find out about the key risks to this Paycom Software narrative. Next Steps With both risks and rewards on the table, does the current narrative really match your own view of Paycom? Take a moment to review the data, challenge the assumptions, and then weigh the stock using our breakdown of 4 key rewards and 1 important warning sign Looking for more investment ideas? If Paycom has sharpened your focus, do not stop there. Broaden your watchlist with other stocks that fit clear, data backed criteria using the Simply Wall Street Screener.  Target potential value opportunities by scanning a curated set of 51 high quality undervalued stocks that pair quality fundamentals with prices that may not fully reflect them. Prioritise resilience by checking out 65 resilient stocks with low risk scores, where companies show stronger risk profiles based on balance sheets and earnings stability. Get ahead of the crowd by reviewing the screener containing 21 high quality undiscovered gems, a focused group of stocks with solid fundamentals that may be flying under most investors’ radar.   This article by Simply Wall St is general in nature. We provide commentary based on historical data\n        and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your\n        financial situation. We aim to bring you long-term focused analysis driven by fundamental data.\n        Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.\n        Simply Wall St has no position in any stocks mentioned.New: Manage All Your Stock Portfolios in One PlaceWe've created the ultimate portfolio companion for stock investors, and it's free.• Connect an unlimited number of Portfolios and see your total in one currency• Be alerted to new Warning Signs or Risks via email or mobile• Track the Fair Value of your stocksTry a Demo Portfolio for FreeHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"}}}