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With a market cap of $12.3 billion, Paycom Software, Inc. (PAYC) provides cloud-based human capital management (HCM) software as a service (SaaS) for small to mid-sized companies in the U.S. Its comprehensive platform streamlines HR processes, including payroll, talent management, benefits administration, compliance, and workforce analytics, covering the entire employee lifecycle from recruitment to retirement.
Shares of the HCM solutions specialist have lagged behind the broader market over the past 52 weeks. PAYC has risen 11.9% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 22.5%. In addition, shares of PAYC are up 4.2% on a YTD basis, aligning with SPX’s gain over the same period.
Focusing more closely, the Oklahoma City, Oklahoma-based company has underperformed the Industrial Select Sector SPDR Fund’s (XLI) 17.5% return over the past 52 weeks and a 5.2% YTD gain.
Shares of Paycom Software rose 2.4% following its strong Q4 earnings release on Feb. 12 due to strong financial performance exceeding expectations. The company reported adjusted EPS of $2.32 and revenue of $493.8 million, driven by 13.6% year-over-year growth from increased sales momentum, AI integration, and international expansion. Adjusted EBITDA surged 22% to $214.9 million, surpassing internal guidance of $184.5 million to $191.5 million, while adjusted net income grew 18% to $130.1 million. Additionally, Paycom’s robust balance sheet, featuring $402 million in cash and zero debt, along with its optimistic 2025 revenue and profitability outlook, reinforced investor confidence.
For the current fiscal year, ending in December 2025, analysts expect PAYC’s EPS to decline nearly 20% year-over-year to $6.90. However, the company's earnings surprise history is promising. It topped the consensus estimates in the last four quarters.
Among the 18 analysts covering the stock, the consensus rating is a “Hold.” That’s based on two “Strong Buy” ratings and 16 “Holds.”
On Dec. 14, 2024, Mizuho analyst Siti Panigrahi raised Paycom's price target to $210 while maintaining a Neutral rating, reflecting higher comp multiples. The firm sees digital transformation, AI, data analytics, and cloud migrations as key growth drivers, with a balanced but attractive industry outlook for 2025.
As of writing, PAYC is trading below the mean price target of $218.67. The Street-high price target of $250 implies a potential upside of 17.1% from the current price levels.
