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What this page is: Delvantic's full research page for Paycom Software, Inc. (PAYC) — AI-driven forensic equity research: mechanical valuation models (DCF, EPV, anchored-PE, scenario) plus three independent AI lenses (Quality / Value / Sentiment). Everything below is rendered server-side; you are not missing content that requires JavaScript. All scores are predictions and research opinions, not financial advice.
Our current read (analysis of 2026-08-23): Designation Watch · Gem Score -4 (−100…+100 Quality+Value blend) · Quality 58 · Value -55 · Sentiment -17 (timing only, not weighted) · Composite fair value $140.33 vs $161.49 at analysis
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profile-header/price-overview— company profile, live quote, market capextended-analysis— the core: three AI lens reads with findings, scores, and the analyst memofuture-predictions— our forward price-band predictionsmarket-narrative/ai-findings/gpt-critique— narrative context, cross-model findings, and an adversarial critique of our own analysis (near the end of the document)- Members-only sections (render as login gates for anonymous readers):
price-history,income-trend,key-metrics,financials(statement tables),insider-trading. The analysis above is public; the raw data tables require a free account.
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Paycom Software, Inc.
PAYC NYSEPaycom Software, Inc. is a provider of cloud-based human capital management software delivered as software-as-a-service. The company focuses on helping organizations manage the entire employment life cycle on a single platform, from talent acquisition and onboarding through payroll, time and labor management, benefits administration, and talent management. Paycom Software, Inc. primarily serves midsize businesses in the United States, typically those with dozens to several thousand employees, offering integrated tools that centralize employee data and automate HR and payroll processes. Its solutions are designed to reduce administrative complexity for HR and finance teams, support compliance with labor and tax regulations, and provide employees with self-service capabilities for tasks such as time entry, benefits selection, and pay review. The company generates most of its revenue from subscriptions to its software platform, supplemented by implementation services, and is headquartered in Oklahoma City, Oklahoma, where it continues to operate as a notable player in the human capital management software market.
Price Overview
Price History (1 Year)
Revenue & Net Income Trend
| Period | Revenue | Net Income | Net Margin | YoY/QoQ |
|---|
Key Metrics
EPS (Diluted): 8.08
Total Equity: $1.73B
Shares: 56,116,000
Total Debt: $0.00
Cash: $370.00M
EBITDA: $743.50M
Total Debt: $0.00
Cash: $370.00M
Revenue: $2.05B
Revenue: $2.05B
Revenue: $2.05B
Total Equity: $1.73B
Tax Rate: 26.8%
Equity: $1.73B
Total Debt: $0.00
Cash: $370.00M
Current Liabilities: $5.37B
Long-Term Debt: $0.00
Total Debt: $0.00
Total Equity: $1.73B
Shares: 56,116,000
Shares: 56,116,000
CapEx: -$270.90M
Shares: 56,116,000
Stock Price: $161.58
Net Income: $453.40M
Industry Benchmarks
Income Statement (Annual)
Last updated: Jul 30, 2026 6:27pm (24d ago)| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue | $1.1B | $1.4B | $1.7B | $1.9B | $2.1B |
| Cost of Revenue | $161.9M | $212.7M | $276.3M | $334.6M | $345.4M |
| Gross Profit | $893.6M | $1.2B | $1.4B | $1.5B | $1.7B |
| Operating Expenses | $640.1M | $783.8M | $966.1M | $914.3M | $1.1B |
| Operating Income | $253.6M | $378.7M | $451.3M | $634.3M | $567.2M |
| Net Income | $196.0M | $281.4M | $340.8M | $502.0M | $453.4M |
| EBITDA | $320.8M | $471.4M | $565.3M | $780.2M | $743.5M |
| EPS | $3.39 | $4.86 | $5.91 | $8.93 | $8.13 |
| EPS (Diluted) | $3.37 | $4.84 | $5.88 | $8.92 | $8.08 |
Balance Sheet (Annual)
Last updated: Jul 30, 2026 6:17pm (24d ago)| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Cash & Equivalents | $278.0M | $400.7M | $294.0M | $402.0M | $370.0M |
| Total Current Assets | $2.3B | $2.8B | $2.8B | $4.3B | $5.8B |
| Total Assets | $3.2B | $3.9B | $4.2B | $5.9B | $7.6B |
| Current Liabilities | $2.0B | $2.4B | $2.5B | $3.9B | $5.4B |
| Long-Term Debt | $27.4M | $29.0M | — | — | — |
| Total Liabilities | $2.3B | $2.7B | $2.9B | $4.3B | $5.9B |
| Total Equity | $893.7M | $1.2B | $1.3B | $1.6B | $1.7B |
| Retained Earnings | $915.6M | $1.2B | $1.5B | $1.9B | $2.3B |
Cash Flow (Annual)
Last updated: Jul 30, 2026 6:27pm (24d ago)| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Operating Cash Flow | $319.4M | $365.1M | $485.0M | $533.9M | $678.9M |
| Capital Expenditure | -$120.7M | -$132.7M | -$192.6M | -$192.9M | -$270.9M |
| Free Cash Flow | $198.7M | $232.4M | $292.5M | $341.0M | $408.0M |
| Acquisitions (net) | — | — | — | — | — |
| Net Debt Issued / (Repaid) | -$1.8M | $-287,000 | -$29.0M | — | — |
| Dividends Paid | — | — | -$64.8M | -$84.8M | -$84.8M |
| Stock Buybacks | — | -$94.7M | -$286.6M | -$122.8M | -$325.5M |
| Net Change in Cash | — | — | — | — | — |
Growth Trends (YoY %)
Last updated: Jul 30, 2026 6:27pm (24d ago)| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Revenue Growth | +30.3% | +23.2% | +11.2% | +8.9% |
| Gross Profit Growth | +30.1% | +21.9% | +9.3% | +10.2% |
| Operating Income Growth | +49.3% | +19.2% | +40.5% | -10.6% |
| Net Income Growth | +43.6% | +21.1% | +47.3% | -9.7% |
| EBITDA Growth | +46.9% | +19.9% | +38.0% | -4.7% |
Dividend History (Last 20)
Last updated: Jul 23, 2026 8:05pm (30d ago)| Date | Dividend | Declaration | Record | Payment |
|---|---|---|---|---|
| 2026-05-26 | $0.38 | — | — | — |
| 2026-03-09 | $0.38 | — | — | — |
| 2025-11-24 | $0.38 | — | — | — |
| 2025-08-25 | $0.38 | — | — | — |
| 2025-05-27 | $0.38 | — | — | — |
| 2025-03-10 | $0.38 | — | — | — |
| 2024-11-25 | $0.38 | — | — | — |
| 2024-08-26 | $0.38 | — | — | — |
| 2024-05-24 | $0.38 | — | — | — |
| 2024-03-01 | $0.38 | — | — | — |
| 2023-11-24 | $0.38 | — | — | — |
| 2023-08-25 | $0.38 | — | — | — |
| 2023-05-26 | $0.38 | — | — | — |
Deep Analysis
Risk : Reward — if the last quarter repeats
Live · as of 2026-08-19 10:36Recovery pays +6%; another quarter like the worst recent one costs 21%. Ratio 0.3:1.
| Case | Growth | Margin | Fair value | vs price ($161.49) |
|---|---|---|---|---|
| Bull — recovery | +14% | 26.2% | $171.54 | +6% |
| Base — stabilizes | +9% | 22.8% | $130.51 | -19% |
| Bear — keeps slipping | +5% | 19.4% | $97.26 | -40% |
| Stress — last quarter repeats | +9% | 22.4% | $128.01 | -21% |
Narrative Economics
market-narrative step).
AI Lens 4th lens · how AI reaches this business · 5-yr
2026-08-10Paycom's largest cost line is human service, implementation and support for mid-market clients; AI agents handling tax-notice research, configuration, and tier-one support cut delivery cost without touching per-employee-per-month pricing, which converts directly into gross and operating margin.
Revenue is priced per employee per module; if AI thins mid-market white-collar headcount across Paycom's own client base, the monetized unit deflates even as the software gets better and retention holds.
Whether AI-driven cost savings stay with Paycom or get competed away as cheap development lets Rippling, Gusto, ADP and Workday match feature breadth downmarket; watch PEPM realized per client and gross margin together - rising margin with flat PEPM is the win, rising margin with falling PEPM is not.
Multi-jurisdiction tax registrations and filing liability, the payroll error blame that no CFO wants to internalize, the single employee record spanning payroll, benefits and time, and an outside direct sales force covering hundreds of US metros.
AI Lens thesis
AI reaches Paycom through three doors, not one: it lowers the cost of delivering an already high-margin service (favorable and near-certain), it lowers the cost of building a competing HCM feature set so differentiation must rest on compliance, liability and distribution rather than code (neutral to negative), and it acts on the customer's headcount, which is literally Paycom's billing unit (the underappreciated negative). The underlying need - paying people correctly and legally - is untouchable, and the willingness to outsource the blame is if anything strengthened when AI makes internal systems technically feasible but legally unattractive. Paycom has also already demonstrated it will automate away its own revenue: Beti removed error-driven reruns and unscheduled payroll fees, a real precedent that automation here can shrink the invoice even as it raises client satisfaction.
What the market may be underestimating
Upside Implementation is the historic friction in mid-market HCM switching; AI-assisted data migration and configuration can shorten go-live, raise sales rep productivity, and lift close rates without adding sales headcount - a growth reacceleration channel the market reads as a cost story only.
Downside Paycom's closed single-database architecture and thin third-party integration posture, historically a strength, is a liability if enterprise AI agents orchestrate HR actions across systems and route around platforms that do not expose clean programmatic access.
Outcome range spread 49 · unresolved
Claude Reading
Looking at the raw quarterly cadence first: Q1 2026 revenue of $571.9M vs Q1 2025's $530.5M is 7.8% YoY — that's actually a deceleration from the 12.3% posted in Q4 2025 ($544.3M vs $493.9M) and well below the 21% run-rate of 2022-2023. Net income of $155.7M in Q1 2026 at a 27.2% margin looks great in isolation, but Paycom has a strong seasonal Q1 (float income, ESPP-related timing); compare full-year 2025 NI of $453.4M vs 2024's $502.0M — earnings actually *declined* 9.7% year-over-year on a full-year basis, even as revenue grew 9%. Operating margin compressed from 33.7% in 2024 to 27.7% in 2025. That's a real deterioration, not noise, and it's what the market is pricing at 20x P/E — not "modest premium," but a discount to Paycom's historical 30-40x multiple.
The synthesis pegs fair value at ~$145 vs $161 current, calling it "fair" with a slight lean overvalued. I partially disagree with the direction of concern. FCF of $408M on a $7.88B market cap is a 5.2% FCF yield with zero debt and $370M cash — for a business still growing high single digits with 83% gross margins and 30% ROIC, that's not expensive, that's cheap on cash flow. The EV/EBITDA of 10.1x is frankly low for a SaaS franchise of this quality. The P/E of 20x reflects the earnings dip, but if operating margins normalize even to 30% (below the 2024 peak), you're looking at ~$500M+ NI on 2026 revenue tracking toward $2.25-2.30B — that's a forward P/E closer to 15-16x.
The contrarian bear case the models underweight: the margin compression from 33.7% to 27.7% happened while revenue grew — meaning opex grew faster than revenue, which is a red flag in mature SaaS. This is either (a) reinvestment for growth reacceleration, (b) competitive spend to defend against Workday/ADP moving downmarket, or (c) structural erosion of the single-database moat. Insider activity is unhelpful — awards and in-kind withholding dominate; the one open-market sale of 2,500 shares is trivial, and the 12,500-share gift is arguably a signal of tax planning at what an insider views as *not a bottom*. The stated "accelerating quarterly trend" in revenue confidence is misleading — Q1 is seasonally strongest; the sequential progression Q2→Q3→Q4 2025 was $483.6M→$493.3M→$544.3M, which is normal seasonal build, not acceleration. The dates on some filings (2026-07-08) look forward-dated, which is suspicious data hygiene worth flagging.
I dissent modestly with the synthesis "fair value" call and lean undervalued. The market narrative layer nails it — this is a trust-in-competence story, not a transformation bet — but the 11% premium the narrative engine cites vs DCF underweights the FCF yield and the reset expectations. My read: at $161 with $408M FCF, zero debt, 30% ROIC, and even 8-10% top-line growth, intrinsic value sits closer to $180-200 if margins stabilize anywhere near 30% operating. The risk is that 2025's margin compression is structural (Workday's midmarket push is real), in which case $140 is fair. The swing factor is the next two quarters of operating margin — specifically whether the Q1 2026 27.2% net margin holds sequentially into Q2/Q3, or whether we see another repeat of 2025's Q2 dip to 18.5%. If Q2 2026 comes in above 22% net margin, the thesis works. If it drops back to 18-19%, the models are right and $145 is generous. Given zero leverage, strong FCF conversion, and a valuation that already prices in the bad news, asymmetry favors longs at these levels — a starter position with adds on any dip to $150 makes sense, but I wouldn't back up the truck until Q2 margins confirm.
GPT Reading
At $161.58, Paycom looks modestly overvalued because the market is paying up for a margin profile that has not actually held steady through the company’s growth slowdown. The core operating story is not broken: revenue rose from $1.06B in 2021 to $2.05B in 2025, a near-doubling in four years, gross margin remains elite at 83.2%, and the balance sheet is clean with no debt and $370M of cash. But the quality of that growth has changed. Annual revenue grew 11.2% in 2025 versus 2024, while operating income fell from $634.3M to $567.2M and net income dropped from $502.0M to $453.4M. That is the key fact pattern here: this is no longer a software company compounding both revenue and earnings together. It is now a slower grower that gave back profitability in the latest full year.
The quarterly numbers sharpen that point. Q1 2026 revenue of $571.9M was up only 7.8% from $530.5M a year earlier, while net income rose 11.7% to $155.7M; that is a decent quarter, but it follows a 2025 in which earnings were under pressure despite top-line gains. The recent run-rate also suggests a company settling into high-single-digit or low-double-digit growth, not something that deserves a premium software multiple by default. On trailing annual figures, investors are paying about 20x earnings, 4.4x sales, and just over 10x EV/EBITDA. Those are not crazy numbers in absolute terms, but for a business growing revenue around 9-10% with recent earnings contraction, they are not obviously cheap either. If anything, the market is already giving Paycom credit for restoring the 2024 margin structure without demanding proof.
What keeps me from being outright bearish is that the underlying business is still better than the most negative interpretation. Free cash flow was $408.0M in 2025 on $678.9M of operating cash flow despite a heavy $270.9M capex burden, and ROIC at 30.5% is excellent. The capex line is unusually high for software, but even after that, FCF margin was about 19.9%, which is still healthy. The company also has room to absorb operational missteps because it carries no leverage. And while annual earnings fell in 2025, the latest quarterly cadence hints that the worst of the margin compression may be passing: Q4 2025 net margin was 20.9% and Q1 2026 improved to 27.2%, ahead of the prior-year quarter’s 26.3%. If that trend continues, today’s multiple would look much more reasonable.
The best argument against my read is straightforward: the stock is not priced like a high-growth SaaS name anymore, and the cash economics may matter more than the 2025 earnings dip. At roughly $7.88B market cap, Paycom trades around 19x trailing net income and about 19.3x trailing FCF, which is a fair-to-attractive range for a debt-free, mission-critical software asset with 80%+ gross margins and recurring revenue characteristics. A smart bull would also note that quarterly revenue has re-accelerated sequentially from $437.5M in Q2 2024 to $571.9M in Q1 2026, and that the “earnings decline” critique relies heavily on one annual step-down after a particularly strong 2024. If 2025 was an investment/reset year rather than the start of structural deterioration, then the present valuation is closer to base case than overvaluation.
What would change my mind is simple: I need to see whether Paycom can convert this latest quarter into a real earnings recovery while sustaining at least ~9-10% revenue growth. If the next few quarters show revenue consistently above $590M-$600M with net margins holding above 24-25%, then the case for a fair value in the high $160s to low $180s strengthens materially. On the other hand, if revenue growth slips into the mid-single digits while annual operating income stays below the 2024 peak of $634.3M, then even 20x earnings is too generous and the stock should trade closer to 15-17x earnings, implying something like $125-$145.
Grok Reading
Paycom’s numbers describe a high-quality mid-market HCM franchise that has already made the hard transition from 30% growth to a steady high-single-digit/low-teens clip, and is now digesting a deliberate margin reset. Full-year 2025 revenue reached $2.05 B (+9% YoY) while operating income fell to $567 M from $634 M and net income dropped to $453 M from $502 M; the operating margin compression from roughly 34% to 27.7% is the single most important data point in the set. Yet the quarterly sequence shows the trough is behind: Q2–Q3 2025 net margins bottomed in the high-teens before Q1 2026 printed $572 M revenue (+7.8% YoY) at a 27.2% net margin and sequential acceleration. Free-cash-flow generation remains robust at $408 M (20% FCF margin) on $679 M of operating cash flow despite elevated $271 M capex, the balance sheet carries zero debt against $370 M cash, and returns stay elite (ROE 26%, ROIC 30.5%, 83% gross margin). At a 10× EV/EBITDA, ~5.2% FCF yield and a trailing P/E in the high teens on still-depressed 2025 earnings, the market is pricing Paycom as a no-growth utility rather than a sticky, land-and-expand SaaS compounder still expanding mid-market wallet share.
The valuation synthesis that anchors fair value near $145 (10% below the $161.58 print) under-weights both the durability of the single-database architecture and the clear Q1 margin rebound; EV/revenue of 3.7× and P/S of 4.4× are modest for 10% top-line growth that is still compounding FCF at an 18% CAGR. Insider activity is noise (routine awards and one small sale), revenue confidence is high and the trend is labeled accelerating, and the narrative layer correctly notes that almost none of the current multiple is story-driven—investors are simply paying for execution competence.
The strongest counter-argument is straightforward: 2025 proved that revenue growth can decelerate to 9% while earnings decline 10%, exactly the combination that collapses SaaS multiples. A smart skeptic would highlight the still-elevated capex, the thin 1.09 current ratio, the sub-6% ROA that hints at a heavier asset base than pure software peers, and the structural threat from ADP and Workday pushing down-market with modernized suites. If the Q1 2026 margin recovery proves one-off and growth slips into the mid-single digits, the 20× P/E becomes a value trap rather than a trough multiple; the models’ $136–145 composite would then look generous, not conservative. I weigh this less heavily because the multi-year FCF CAGR of 18% and the rapid sequential margin repair already visible in the latest quarter argue the 2025 dip was investment, not structural erosion.
I would flip to a clear overvalued stance if the next two prints show net margins stuck below 22% or trailing twelve-month revenue growth falling under 7%, or if management signals a sustained step-up in competitive discounting. Conversely, two more quarters of 25%+ net margins on ≥9% growth would make the current $162 level look like an obvious entry.
Big-3 Panel — where each AI stands
Claude — Second Response · undervalued revised
VERDICT: Modestly undervalued at $161 — $175-190 fair value if Q2/Q3 2026 net margins hold ≥24% on ≥9% revenue growth; drops to $135-145 if margins revert to 2025's mid-quarter teens.
Grok essentially confirms my read from a different angle, so the interesting tension is with GPT, who lands at $140-150 fair value. GPT's core argument is that I'm giving Paycom credit for a margin recovery that hasn't been proven — that the 2025 print (op margin 27.7% vs 33.7%, NI down 9.7% on revenue up 11.2%) is the actual signal, and Q1 2026's 27.2% net margin is one data point against four quarters of deterioration. That's a fair discipline, and it did make me sharpen my own conditional language. But I don't think it changes the direction of the call, because GPT and I are pricing the *same* asymmetry differently: he's anchoring to trailing earnings at ~20x and asking for proof; I'm anchoring to $408M FCF at a 5.2% yield on a zero-debt, 30% ROIC business and asking what has to go wrong to justify $140. Those are different denominators, and FCF held up in 2025 even as GAAP earnings compressed — that matters.
What GPT gets right and I want to explicitly credit: my "Q2 2026 above 22% net margin" threshold was too loose. His framing — needing ≥24-25% net margins on $590M+ revenue for two consecutive quarters — is the more honest bar, and I'll adopt it. He's also right that the 2025 earnings step-down is not one quarter of noise; it's a full-year reset, and dismissing it as seasonal or investment-driven requires more evidence than I have. But his fair-value math (15-17x earnings on a compressed base) implicitly assumes the compressed base is the new normal, which contradicts the Q1 2026 print he himself acknowledges. You can't cite Q1 2026's 27.2% margin as encouraging and then value the stock on TTM earnings that include the depressed middle quarters of 2025.
Net: I hold undervalued, but I'm tightening the band to $175-190 (from $180-200) and raising the confirmation bar. The FCF yield and balance sheet still carry the argument; GPT's discipline on margin proof is warranted but doesn't overturn it.
GPT — Second Response · fairly valued changed direction
VERDICT: Roughly fairly valued at $161.58, with fair range about $150-$170 today; upside to $180+ needs confirmed margin recovery beyond Q1 seasonality.
Claude’s push on valuation did move me somewhat: a debt-free software asset with 83% gross margins, 30% ROIC, and a 5.2% FCF yield is not easy to call plainly expensive. I also think both colleagues are right that I may have underweighted how much “bad news” is already embedded in a ~20x trough-ish earnings multiple and ~10x EV/EBITDA. Where I still resist the bullish turn is on what exactly that cash flow is buying you. Paycom is not being valued on a depressed gross margin or balance-sheet problem; it is being asked to re-prove operating discipline after a year in which revenue rose 9% and operating income fell 11%. That is not a trivial wobble for a company no longer growing fast enough to outrun cost mistakes. Grok’s “trough is behind” framing leans heavily on one Q1 print, and Claude’s own caution on seasonality undercuts using Q1 as confirmation that normalization is underway.
What failed to move me is the idea that 10x EV/EBITDA or a 5% FCF yield is automatically cheap for this specific setup. FCF is healthy, but capex is also unusually heavy for software, and the 2025 margin reset may reflect more than temporary reinvestment. Claude’s competitive-spend possibility is actually the strongest bear argument in the packet: if opex must stay elevated to defend the mid-market against ADP/Workday, then 2024 margins were the exception, not the baseline. I do revise modestly away from “overvalued” as a directional call because the downside from $161 looks less compelling once I give proper credit to cash generation and zero leverage. But I am not ready to underwrite $180-200 without at least another quarter or two showing that margins can hold above roughly 24-25% outside the favorable Q1 seasonal profile. So I move from slight overvaluation to essentially fair, with a cautious bias.
Grok — Second Response · undervalued held
VERDICT: High-quality compounder undervalued at $162; fair value $180-195 if margins stabilize near 28%+
Claude’s emphasis on Q1 seasonality and the true full-year 2025 earnings decline (NI –9.7% even as revenue rose) correctly flags that I overstated “sequential acceleration.” The Q2–Q4 2025 build was ordinary seasonality, not a re-acceleration signal, and the opex-outpacing-revenue dynamic is a legitimate red flag that could reflect competitive defense rather than pure reinvestment. That data point modestly lowers my near-term confidence. GPT’s core claim—that the market is already paying for an unproven margin restoration and that 9–10% growth plus an earnings reset justifies only $140–150—does not survive the cash numbers: 5.2% FCF yield, zero debt, 30% ROIC and 20% FCF margins remain elite for a sticky mid-market franchise, and the Q1 27.2% net margin print (even if seasonal) sits well above the 2025 trough. Those facts keep the 10× EV/EBITDA multiple looking like a trough discount, not a premium.
I therefore hold the undervalued call. The swing factor both colleagues correctly isolate—whether Q2/Q3 2026 net margins stay above ~22–24%—is unchanged; two confirming quarters would push fair value firmly into the high $180s. Until then the asymmetry still favors the long side at $162 because the balance sheet and FCF conversion already price in the bad case.
Advanced Analysis Forensic deep-dive · separate lenses
Paycom compounded revenue from 1.06B in 2021 to 2.05B in 2025 (roughly 18% CAGR) at gross margins consistently above 82%. FCF has climbed every year from 199M to 408M, and OCF/NI of 1.38x with accruals at -2.6% of assets signals real cash-backed earnings — the Beneish M of -2.59 corroborates no manipulation flags. The balance sheet holds 370M net cash with no reliance on external capital. Capital allocation is shareholder-friendly for a software firm: diluted shares fell from 58.2M to 56.1M (-0.9% CAGR), and buybacks ran 1.79x SBC, so 5.8% SBC-to-revenue is being more than offset. Insider tape is neutral - awards and tax-withholding dominate, with only one modest 351K open-market sale and a 12.5K share gift from founder Richison; nothing screaming. The soft spots: revenue growth decelerated from ~30% in 2022 to ~9% in 2025, and operating margin gave back meaningful ground in 2025 (33.7% to 27.6%) despite net income staying high (453M vs 502M prior). GM also drifted from 84.7% to 83.2%. That combination - slower top line plus margin give-back - is the main reason this is Strong rather than Fortress.
Verify before trusting this (5)
- What drove the 2025 operating margin drop from 33.7% to 27.6% - reinvestment, sales productivity, or a one-timer
- Whether the revenue deceleration reflects saturation in mid-market HCM or competitive share loss (Rippling, ADP Run, Gusto)
- Customer retention and net revenue retention disclosures in the 10-K
- Details of any legal or CEO-related governance items given prior Beti-related sales execution issues
- Composition of the 71.8K share award to founder Richison in Feb 2026 and vesting terms
The e2e composite pegs deserved value at $136.68, signal-adjusted to $145.15 - both below the $161.49 quote, implying roughly 10% downside rather than upside. The DCF ($128) and EPV floor ($89) both sit meaningfully under price; only the anchored-PE method ($201) argues for cheapness, and that method is essentially capitalizing a peak multiple onto decelerating earnings - I discount it. Strip the outlier and the honest deserved range is ~$115-145, with $161 sitting at or above the top end.
Verify before trusting this (4)
- FY26 revenue guide and whether growth stabilizes above 10%
- operating margin trajectory - is the 2025 dip one-time reinvestment or structural?
- net revenue retention and any disclosure on competitive losses to Workday/ADP
- buyback pace vs SBC to confirm real per-share value creation
The macro tape is mildly hostile: VIX at 20.7, S&P off nearly 4% from highs, 10y at 4.61%, and market PE stretched at 26.2. That is a risk-off backdrop that typically punishes story stocks first. PAYC, with a 0.8 beta and a 'steady-compounder' archetype (minimal intensity, durable, low cult), is exactly the kind of name that tends to underperform less in stress but also gets no bid from AI-narrative flows. Recent news flow flagged PAYC catching a lift from a Treasury-yield drop and enterprise-software risk-on rotation, but that is a weak, market-driven pulse, not a story of its own. The narrative gap is the key sentiment fact: there is no AI angle, no M&A hype, no cult following - just trust in execution. In a tape where the market is chasing AI beneficiaries and punishing anything with a growth-slowdown whiff, a boring HCM compounder faces stiffer downmarket competition narrative (Workday, ADP) without a re-rating hook. Analyst-adjacent tone is mixed to negative (a '3 Reasons to Sell PAYC' piece circulating), and the stock has tracked the market rather than led. Net: modest macro headwind, muted by low beta; narrative headwind from being a no-story name in a story-driven tape; offset by boring-is-good defensive appeal in a stress regime. Roughly balanced.
Verify before trusting this (4)
- Whether the AI-capex-cycle concern deepens (helps defensive software, hurts hyperscaler-linked names)
- Any shift in analyst tone or target revisions after next print
- Signs of Workday/ADP win-rate pressure in mid-market becoming a live story
- 10y yield direction - a sustained drop below 4.4% would broadly bid software
AI reaches Paycom through three doors, not one: it lowers the cost of delivering an already high-margin service (favorable and near-certain), it lowers the cost of building a competing HCM feature set so differentiation must rest on compliance, liability and distribution rather than code (neutral to negative), and it acts on the customer's headcount, which is literally Paycom's billing unit (the underappreciated negative). The underlying need - paying people correctly and legally - is untouchable, and the willingness to outsource the blame is if anything strengthened when AI makes internal systems technically feasible but legally unattractive. Paycom has also already demonstrated it will automate away its own revenue: Beti removed error-driven reruns and unscheduled payroll fees, a real precedent that automation here can shrink the invoice even as it raises client satisfaction.
None surfaced.
Verify before trusting this (8)
- tax notice volume per client
- penalty and indemnity disclosures
- client retention above 90 percent
- regulatory complexity in payroll tax
- gross margin above 84 percent
- service headcount per 1000 clients
- implementation time to go-live
- operating margin restored above 33
This lens hasn't been run for this ticker yet.
When we made this prediction on Aug 1, 2026, PAYC was $163.96. We expect it to be $145.50 by Feb 2027, and we consider it great value under $130.00. This is an early model (v0.6.0) — the direction is more reliable than the exact price. Made Aug 1, 2026.
Blue is our prediction, starting the day we made it. Grey is a slower route to the same place — the same destination, taking longer. Black is the actual price, so you can see how we are doing.