Paycom Software Inc (PAYC, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $274.09, Paycom Software Inc has witnessed a daily loss of 1.02%, marked against a three-month change of -14.22%. A thorough analysis, underlined by the GuruFocus Score Rating, suggests that Paycom Software Inc is well-positioned for substantial growth in the near future.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Here is a breakdown of Paycom Software Inc's GF Score:
- Financial strength rank: 8/10
- Profitability rank: 9/10
- Growth rank: 10/10
- GF Value rank: 8/10
- Momentum rank: 7/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in financial strength, profitability, and growth, and slightly lower ranks in GF value and momentum, GuruFocus assigned Paycom Software Inc the GF Score of 96 out of 100, which signals the highest outperformance potential.
Understanding Paycom Software Inc's Business
Paycom Software Inc, with a market cap of $15.88 billion, is a fast-growing provider of payroll and human capital management, or HCM, software primarily targeting clients with 50-10,000 employees in the United States. Established in 1998, Paycom services about 19,000 clients as of 2022, based on parent company grouping. Alongside its core payroll software, Paycom offers various HCM add-on modules, including time and attendance, talent management, and benefits administration. The company's sales stand at $1.56 billion, with an operating margin of 27.47%.
Financial Strength Breakdown
According to the Financial Strength rating, Paycom Software Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for Paycom Software Inc stands impressively at 125.6, underscoring its strong capability to cover its interest obligations. With an Altman Z-Score of 5.2, Paycom Software Inc exhibits a strong defense against financial distress. With a favorable Debt-to-Revenue ratio of 0.02, Paycom Software Inc's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Paycom Software Inc's impressive standing among its peers in generating profit. Paycom Software Inc's strong Predictability Rank of 4.0 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Paycom Software Inc demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 23.2%, which outperforms better than 78.45% of 2413 companies in the Software industry. Moreover, Paycom Software Inc has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 21.8, and the rate over the past five years is 23. This trend accentuates the company's continued capability to drive growth.
Given Paycom Software Inc's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential outperformance. This analysis underscores the company's robust financial health, consistent profitability, and impressive growth trajectory, making it a compelling investment opportunity. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen