Paycom Software, Inc. provides cloud-based human capital management (HCM) solution delivered as software-as-a-service for small to mid-sized companies in the United States. It offers functionality and data analytics that businesses need to manage the employment life cycle from recruitment to retirement. The company's HCM solution provides a suite of applications in the areas of talent acquisition, including applicant tracking, candidate tracker, background checks, on-boarding, e-verify, and tax credit services; and time and labor management, such as time and attendance, scheduling/schedule exchange, time-off requests, labor allocation, labor management reports/push reporting, and geofencing/geotracking, and Microfence, a proprietary Bluetooth. Its HCM solution also offers payroll applications comprising better employee transaction interface, payroll and tax management, Paycom pay, expense management, mileage tracker/fixed and variable rates, garnishment management, and GL concierge applications; and talent management applications that include employee self-service, compensation budgeting, performance management, position management, and Paycom learning and content subscriptions, as well as my analytics, which offer employment predictor reporting. In addition, its HCM solution provides manager on-the-go that gives supervisors and managers the ability to perform a variety of tasks, such as approving time-off requests and expense reimbursements; direct data exchange; ask here, a tool for direct line of communication to ask work-related questions; document and checklist; government and compliance; benefits administration/benefits to carrier; COBRA administration; personnel action and performance discussion forms; surveys; and affordable care act applications, as well as Clue, which securely collect, track, and manage the vaccination and testing data of the workforce. Paycom Software, Inc. was founded in 1998 and is headquartered in Oklahoma City, Oklahoma.
Price Overview
Price History (1 Year)
Revenue & Net Income Trend
| Period | Revenue | Net Income | Net Margin | YoY/QoQ |
|---|
Key Metrics
EPS (Diluted): 8.13
Total Equity: $1.73B
Shares: 56,100,000
Total Debt: $90.30M
Cash: $370.00M
EBITDA: $799.10M
Total Debt: $90.30M
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: $90.30M
Cash: $370.00M
Current Liabilities: $5.37B
Long-Term Debt: $61.90M
Total Debt: $90.30M
Total Equity: $1.73B
Shares: 56,100,000
Shares: 56,100,000
CapEx: -$270.90M
Shares: 56,100,000
Stock Price: $137.23
Net Income: $453.40M
Industry Benchmarks
Advanced Analysis Forensic deep-dive · three lenses
Paycom is a mature, self-funding SaaS business: revenue compounded from $1.06B (2021) to $2.05B (2025), FCF doubled from $193M to $408M, and the company is a net repurchaser (diluted shares fell from 58.2M to 56.1M, buyback/SBC ratio 259%). OCF/NI of 1.38x and accruals of -2.6% of assets indicate earnings are backed by cash — the FCF quality flag from the module is well supported by the raw numbers. SBC at 0% of revenue is unusually low for a software company and a real positive on per-share discipline.
That said, the trajectory shows cracks. Gross margin slid from 84.7% in 2021 to 78.6% in 2025 — a ~600bp erosion that suggests rising cost-to-serve, possibly tied to the Beti automation initiative cannibalizing higher-margin service revenue. Operating margin spiked to 33.7% in 2024 then fell back to 27.6% in 2025, and net income actually declined from $502M to $453M despite revenue growth — an unusual reversal for a 'mature earner.' The Altman Z of 1.77 is less alarming for an asset-light SaaS (the model is calibrated for manufacturers), but the Beneish M of -1.52 combined with declining GM warrants attention.
Insider behavior is a yellow flag, not red: 19 sells / 0 buys over 12 months totaling ~$9.6M, mostly small option-exercise/tax-withholding adjacent activity, not a CEO dumping. Founder Richison received a 71.8K share award in Feb 2026, suggesting continued alignment.
Verify before trusting this (6)
- Why gross margin compressed ~600bps since 2021 — is Beti automation cannibalizing service revenue, or is cloud/hosting cost inflating COGS?
- What drove the 2025 operating margin step-down from 33.7% to 27.6% — sales/marketing reinvestment, or competitive pressure on pricing?
- Client funds held (payroll float) on the balance sheet — affects both Altman Z interpretation and interest income contribution to operating profit
- Customer retention/churn trends — is the GM compression a sign of competitive losses to Workday/ADP/Rippling?
- Confirm SBC is genuinely ~0% of revenue (raw evidence shows 0%) — unusual enough to deserve verification in the 10-K
- Founder Richison's recent equity grant terms and any performance conditions
The composite FV of $191.86 (signal-adj $190.76) implies ~39% upside, but the inputs are noisy: the anchored-PE of $333.70 is a runaway output (likely capitalizing a peak multiple onto normalized earnings) and should be heavily discounted. The DCF at $171.98 is the most defensible anchor, while the EPV floor at $89.76 reminds us that on a no-growth, current-margin basis the business is worth meaningfully less than today's price. Splitting the difference and tilting toward the DCF, I peg deserved value in the $160-175 range — call it ~$170 — implying roughly 20-25% upside, not 39%.
At $137, the market appears to be pricing in continued growth deceleration toward the mid-teens and the gross-margin slippage flagged by the quality lens (margin down every year, 2025 net income down YoY). That's a reasonable bear case, not a heroic one. The business is strong enough to deserve a premium to EPV, and the DCF doesn't require fairy-tale assumptions to clear current price. So there's a gap, but it's a 'modestly cheap' gap, not a deep-value one — the kind where you want a bit more cushion before pounding the table.
Verify before trusting this (5)
- FY26 revenue growth guidance — is deceleration stabilizing in mid-teens or continuing toward low-teens?
- Gross margin trajectory in next 2 quarters — is the slide bottoming or structural?
- Net revenue retention disclosure — bull case requires 20%+ NRR holding
- Any one-offs in 2025 net income decline (litigation, marketing reset, stock comp ramp)
- Management commentary on pricing/competition vs ADP, Workday, Rippling in SMB
The market regime is neutral with VIX around 17 and the S&P only 1.8% off highs, so there is no risk-off mauling to fear; PAYC's 0.79 beta further mutes whatever macro chop arrives. The bigger sentiment force is sector-level: profitable mid-cap SaaS has been quietly de-rated as the narrative oxygen flows to AI-leveraged software, and PAYC has no AI story to ride. It is not being actively punished, it is being ignored - a slow drift headwind rather than an acute one.
Verify before trusting this (4)
- Next earnings print for any sign of growth reacceleration or AI-product announcements that could reframe the narrative
- Watch for analyst upgrade/downgrade activity - the current zero-revision month is unsustainable into a catalyst
- Software sector relative strength vs AI-thematic baskets - a rotation back to profitable SaaS would flip the read to tailwind
- VIX above 22 or S&P drawdown past 5% to test whether the low-beta defensive bid actually shows up
Deep Analysis
Pre-flight intelligence scans the company first, then routes to the right analytical methods.
Income Statement (Annual)
Last updated: Jun 2, 2026 3:16pm (36d 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 | $439.3M |
| Gross Profit | $893.6M | $1.2B | $1.4B | $1.5B | $1.6B |
| Operating Expenses | $640.1M | $783.8M | $966.1M | $914.3M | $1.0B |
| 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 | $323.2M | $484.8M | $588.2M | $798.3M | $799.1M |
| EPS | $3.39 | $4.86 | $5.91 | $8.93 | $8.13 |
| EPS (Diluted) | — | — | — | — | — |
Balance Sheet (Annual)
Last updated: Jun 2, 2026 3:13pm (36d 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 | $0 | $0 | $61.9M |
| 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: Jun 2, 2026 3:16pm (36d ago)| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Operating Cash Flow | $319.4M | $365.1M | $485.0M | $533.9M | $678.9M |
| Capital Expenditure | -$126.2M | -$136.8M | -$196.8M | -$192.9M | -$270.9M |
| Free Cash Flow | $193.2M | $228.3M | $288.2M | $341.0M | $408.0M |
| Acquisitions (net) | $126.0M | -$382.2M | $0 | $0 | $100,000 |
| Debt Repayment | — | — | — | — | — |
| Dividends Paid | — | — | — | — | — |
| Stock Buybacks | -$65.6M | -$94.7M | -$286.6M | -$122.8M | -$325.5M |
| Net Change in Cash | $126.3M | $122.8M | -$106.7M | $108.0M | -$32.0M |
Analyst Estimates (Annual)
Last updated: Jun 5, 2026 1:15pm (33d ago)| Metric | 2025 | 2026 | 2027 | 2028 |
|---|---|---|---|---|
| Revenue |
$2.1B $2.0B – $2.1B
|
$2.2B $2.2B – $2.2B
|
$2.3B $2.3B – $2.4B
|
$2.5B $2.5B – $2.5B
|
| EBITDA |
$1.0B $1.0B – $1.0B
|
$1.1B $1.1B – $1.1B
|
$1.2B $1.2B – $1.2B
|
$1.2B $1.2B – $1.2B
|
| Net Income |
$519.5M $512.0M – $527.1M
|
$612.0M $575.3M – $648.7M
|
$732.9M $627.6M – $838.1M
|
$725.5M $672.6M – $778.5M
|
| EPS | — | — | — | — |
Growth Trends (YoY %)
Last updated: Jun 2, 2026 3:16pm (36d 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% | +4.1% |
| Operating Income Growth | +49.3% | +19.2% | +40.5% | -10.6% |
| Net Income Growth | +43.6% | +21.1% | +47.3% | -9.7% |
| EBITDA Growth | +50.0% | +21.3% | +35.7% | +0.1% |
Dividend History (Last 20)
Last updated: Jun 2, 2026 3:11pm (36d ago)| Date | Dividend | Declaration | Record | Payment |
|---|---|---|---|---|
| 2026-05-26 | $0.38 | 2026-05-04 | 2026-05-26 | 2026-06-08 |
| 2026-03-09 | $0.38 | 2026-02-10 | 2026-03-09 | 2026-03-23 |
| 2025-11-24 | $0.38 | 2025-11-03 | 2025-11-24 | 2025-12-08 |
| 2025-08-25 | $0.38 | 2025-08-04 | 2025-08-25 | 2025-09-08 |
| 2025-05-27 | $0.38 | 2025-05-05 | 2025-05-27 | 2025-06-09 |
| 2025-03-10 | $0.38 | 2025-02-10 | 2025-03-10 | 2025-03-24 |
| 2024-11-25 | $0.38 | 2024-10-28 | 2024-11-25 | 2024-12-09 |
| 2024-08-26 | $0.38 | 2024-07-29 | 2024-08-26 | 2024-09-09 |
| 2024-05-24 | $0.38 | 2024-04-29 | 2024-05-28 | 2024-06-10 |
| 2024-03-01 | $0.38 | 2024-02-05 | 2024-03-04 | 2024-03-18 |
| 2023-11-24 | $0.38 | 2023-10-30 | 2023-11-27 | 2023-12-11 |
| 2023-08-25 | $0.38 | 2023-07-31 | 2023-08-28 | 2023-09-11 |
| 2023-05-26 | $0.38 | 2023-05-15 | 2023-05-30 | 2023-06-12 |
Insider Trading (Recent)
Last updated: Jun 5, 2026 1:18pm (33d ago)All SEC Form 4 codes
- P Purchase
- Open-market or private purchase of shares.
- S Sale
- Open-market or private sale of shares.
- A Award / grant
- Grant or award of securities (RSUs, options, etc.) under Rule 16b-3.
- D Return to issuer
- Securities disposed back to the company under Rule 16b-3.
- F In-kind (tax)
- Shares withheld or delivered to pay the option-exercise price or tax — not an open-market sale.
- I Discretionary
- Discretionary transaction under an employee plan — Rule 16b-3(f).
- M Option exercise
- Exercise or conversion of a derivative (option/RSU) into shares — exempt.
- C Conversion
- Conversion of a derivative security into the underlying shares.
- E Short expiration
- Expiration of a short derivative position.
- H Long expiration
- Expiration or cancellation of a long derivative position with value received.
- O OTM exercise
- Exercise of an out-of-the-money derivative.
- X ITM exercise
- Exercise of an in-the-money or at-the-money derivative.
- G Gift
- Bona fide gift of securities.
- L Small acquisition
- Small acquisition under Rule 16a-6.
- W Inheritance
- Acquisition or disposition by will or the laws of descent.
- Z Voting trust
- Deposit into or withdrawal from a voting trust.
- J Other
- Other acquisition or disposition (explained in a Form 4 footnote).
- K Equity swap
- Transaction in an equity swap or similar instrument.
- U Tender / buyout
- Disposition via tender of shares in a change-of-control transaction.
Compensation-plan codes (A, D, F, M) are routine and rarely directional. Open-market P (buy) and S (sale) carry the most signal.
| Date | Insider | Type | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-06-15 | Richison Chad R. | G-Gift | 12,500.00 | $0.00 | $0 |
| 2026-06-15 | Richison Chad R. | G-Gift | 12,500.00 | $0.00 | $0 |
| 2026-05-18 | Peck Randall | S-Sale | 2,500.00 | $140.50 | $351,250 |
| 2026-05-10 | Hadlock Terrell Shane | F-InKind | 2,728.00 | $138.44 | $377,664 |
| 2026-05-10 | Peck Randall | F-InKind | 336.00 | $138.44 | $46,516 |
| 2026-05-04 | BINZ JOSEPH LEO | A-Award | 1,890.00 | $0.00 | $0 |
| 2026-05-04 | DUQUES HENRY C | A-Award | 1,890.00 | $0.00 | $0 |
| 2026-05-04 | WATTS J C JR | A-Award | 1,890.00 | $0.00 | $0 |
| 2026-05-04 | TURNEY SHAREN J | A-Award | 1,890.00 | $0.00 | $0 |
| 2026-05-04 | PETERS FREDERICK C II | A-Award | 1,890.00 | $0.00 | $0 |
| 2026-02-18 | Richison Chad R. | A-Award | 71,827.00 | $0.00 | $0 |
| 2026-02-18 | Foster Robert D. | A-Award | 17,957.00 | $0.00 | $0 |
| 2026-02-18 | Hadlock Terrell Shane | A-Award | 20,950.00 | $0.00 | $0 |
| 2026-02-18 | Peck Randall | A-Award | 9,976.00 | $0.00 | $0 |
| 2026-02-18 | York Jeffrey D. | A-Award | 13,967.00 | $0.00 | $0 |
| 2026-02-10 | Foster Robert D. | A-Award | 9,589.00 | $0.00 | $0 |
| 2026-02-10 | Foster Robert D. | F-InKind | 3,515.00 | $124.94 | $439,164 |
| 2026-02-10 | Richison Chad R. | A-Award | 43,148.00 | $0.00 | $0 |
| 2026-02-10 | Richison Chad R. | F-InKind | 18,921.00 | $124.94 | $2.4M |
| 2026-02-10 | Peck Randall | A-Award | 8,390.00 | $0.00 | $0 |
Narrative Economics
market-narrative step).
Delvantic AI Findings
Looking at the raw numbers first: PAYC printed $571.9M in Q1 2026, up from $530.5M a year prior — that's only 7.8% YoY, decelerating from the ~13% pace seen in FY24. But net income of $155.7M at a 27.2% margin is genuinely impressive and the highest quarterly margin in the dataset. FY25 revenue of $2.05B (+9% YoY) with FCF of $408M (~20% FCF margin) on a $7.49B market cap gives a ~5.4% FCF yield. EV/EBITDA of 9.8x for a software business with 78.6% gross margins and 27.6% operating margins is unambiguously cheap on absolute terms — the question is whether the growth deceleration justifies it. ROIC of 21% and ROE of 31% (even with the TTM caveat) tell me capital efficiency hasn't broken. The FY25 NI of $453M is actually *down* from FY24's $502M, which is the one number that genuinely concerns me — earnings went backwards while revenue grew 9%, implying real margin pressure at the full-year level even though Q1 2026 snapped back.
Where I disagree with the prior models: the synthesis verdict of $190 fair value (+39% upside) feels aggressive given that FY25 earnings declined YoY and revenue growth is settling into high single digits. A DCF that produces $190 is implicitly extrapolating FCF CAGR closer to the 19% historical pace, but recent revenue YoY of 9% and the FY24→FY25 NI decline suggest the steady-state growth is more like 8-12%. The Market Forces signal ("winning share by losing money") is flatly wrong — Paycom is not losing money, it generated $679M in operating cash flow and $408M in FCF in FY25. That signal looks like a template misfire. The Pre-Flight read (mature, profitable, traditional SaaS) is the most honest characterization here. The narrative layer's "anchored / moderate intensity" framing is right: this isn't a story stock, it's a multiple-compression story, and at 14.9x TTM P/E and 9.8x EV/EBITDA the compression has largely happened.
The contrarian case worth taking seriously: payroll/HCM is structurally commoditizing. Rippling is eating the low end, Workday owns enterprise, ADP has the installed base, and Paycom's mid-market moat depends on a sales-led motion that's expensive to maintain. The FY24→FY25 operating income decline from $634M to $567M (down 11%) while revenue grew 9% is exactly the margin compression a bear would predict from competitive intensity — sales/R&D spend rising faster than revenue. The Q1 2026 margin pop to 27.2% could be seasonal (Q1 historically prints highest margins due to ESPP/W-2 processing) rather than a sustainable inflection; Q1 2025 also hit 26.3% before falling to 18.5% in Q2. Insider activity shows awards and an open-market sale of only 2,500 shares — not meaningful selling pressure, but no insider buying either at what's allegedly a 39% discount, which is telling. If management thought $137 was a gift, why no Form 4 buys?
My verdict: I dissent from the $190 fair value but agree PAYC is cheap, not fairly valued. At 14.9x earnings, 9.8x EV/EBITDA, ~5.4% FCF yield, and 21% ROIC, this is a quality compounder priced like a no-growth utility. But the FY25 earnings decline is real and the $190 target assumes a re-rating that requires either growth reacceleration (not visible yet beyond one Q1 print) or multiple expansion (requires sentiment shift on SaaS). Fair value is more like $165-175 — call it ~12-15% upside, not 39% — based on 17-18x FY26E earnings of ~$10/share assuming the Q1 margin trajectory holds for half the year. The asymmetry is favorable: downside to $115-120 (15x trough earnings) versus upside to $175 on stabilization. Worth owning, but the prior models are over-egging the discount by anchoring on a DCF that hasn't fully metabolized the FY25 margin reset.
GPT Critique
Upon reviewing Paycom Software's recent financials, it's evident that the company is experiencing a transition period marked by decelerating growth rates and margin fluctuations. Notably, the quarterly revenue growth has slowed from 13% in 2024 to just 7.8% in the latest quarter, indicating a potential maturation phase. However, the impressive net income margin of 27.2% in Q1 2026 is a standout, suggesting that while growth may be slowing, profitability remains robust. The company's free cash flow of $408 million, reflecting a 20% margin, underscores its strong cash generation capabilities, despite the competitive pressures that seem to be compressing margins on an annual basis.
I find myself in agreement with Claude Opus on several points. The decision to peg Paycom's fair value at $165-175 resonates more accurately with the company's current financial trajectory than the $190 suggested by the prior model. Opus's emphasis on the recent earnings decline despite revenue growth highlights a critical area of concern that the previous analysis overlooks. The assertion that Paycom's competitive position is a factor in its margin compression is consistent with my interpretation of the data, particularly given the operating income drop from $634 million to $567 million in FY25 despite a revenue increase.
However, I diverge from Opus regarding the narrative surrounding Paycom's competitive stance. While Opus dismisses the "winning share by losing money" signal as a misfire, I believe this reflects the market's perception of Paycom's strategic positioning. The company operates in a commoditizing sector where maintaining market share can indeed necessitate higher spending, potentially impacting margins. The narrative that Paycom is primarily a victim of multiple compression rather than a deteriorating competitive position may not fully capture the risks associated with its market environment.
A skeptic might argue that both Opus and I underappreciate the potential for Paycom to leverage its SaaS model to regain growth momentum. The firm's strong cash flow and high gross margins could be reinvested into growth initiatives or strategic acquisitions, countering the current market narrative of stagnation. Additionally, the insider selling activity, while limited, might not necessarily indicate management's lack of confidence but could be routine diversification.