Paycom Software Inc (PAYC, Financial) has recently garnered attention from the investment community, thanks to its solid financial performance and promising growth prospects. With its stock price at $167.07, despite a slight daily dip of 0.27%, the company's three-month performance shows a significant decline of 42.47%. However, a deep dive into Paycom Software Inc's GF Score reveals a company poised for substantial growth, boasting a score that indicates a strong potential for market outperformance.
What Is the GF Score?
The GF Score is an exclusive stock performance ranking system by GuruFocus, which evaluates stocks based on five key aspects: financial strength, profitability, growth, value, and momentum. These aspects have been backtested from 2006 to 2021, showing a strong correlation with long-term stock performance. A higher GF Score typically indicates a greater likelihood of generating superior returns. The GF Score ranges from 0 to 100, with 100 representing the highest potential for outperformance.
- Financial strength rank: 8/10
- Profitability rank: 9/10
- Growth rank: 10/10
- GF Value rank: 4/10
- Momentum rank: 7/10
With a high financial strength rank and an exceptional growth rank, Paycom Software Inc's GF Score stands at an impressive 93 out of 100. This score reflects the company's robust financial health and dynamic growth trajectory, despite a moderate GF Value rank, indicating that the stock may be somewhat overvalued at the current price.
Understanding Paycom Software Inc's Business
Paycom Software Inc, with a market cap of $9.64 billion and sales of $1.63 billion, operates with a healthy operating margin of 27.64%. Established in 1998, Paycom is a leading provider of payroll and human capital management (HCM) software, catering to a diverse clientele ranging from 50 to 10,000 employees across the United States. The company's comprehensive suite of HCM solutions includes payroll processing, time and attendance, talent management, and benefits administration. Paycom's commitment to innovation and customer service has secured its position as a go-to solution for nearly 19,000 clients, as of 2022.
Financial Strength Breakdown
Paycom Software Inc's financial fortitude is evident in its Financial Strength rank of 8/10. The company's Interest Coverage ratio is an impressive 172.58, showcasing its ability to comfortably meet interest expenses. This level of financial stability is a hallmark of companies that legendary investor Benjamin Graham would favor, as it indicates a strong buffer against market volatility. Additionally, Paycom Software Inc's Debt-to-Revenue ratio of 0.02 signifies a strategic approach to debt management, further solidifying its financial health.
Profitability Rank Breakdown
The company's Profitability Rank of 9/10 is a testament to its efficiency in generating profits. Paycom Software Inc's financial acumen is further validated by its Piotroski F-Score, which is based on a nine-point scale assessing profitability, funding, and operational efficiency. The company's Predictability Rank of 4 stars out of 5 indicates a consistent track record of operational performance, instilling confidence in investors about the company's future prospects.
Growth Rank Breakdown
Paycom Software Inc's Growth Rank of 10/10 underscores its commitment to expansion and innovation. The company's 3-Year Revenue Growth Rate of 23.2% surpasses 77.91% of its peers in the Software industry. This growth is complemented by a significant increase in EBITDA over the past few years, with a three-year growth rate of 21.8 and a five-year rate of 23, highlighting Paycom Software Inc's ability to scale its operations effectively.
Conclusion: Paycom Software Inc's Path to Outperformance
Considering Paycom Software Inc's strong financial strength, exceptional profitability, and impressive growth metrics, the GF Score underscores the company's unparalleled position for potential outperformance. Investors seeking similar opportunities can explore more companies with strong GF Scores using the GF Score Screen. As Paycom Software Inc continues to innovate and expand its market reach, it remains a compelling choice for value investors looking for growth and stability in the dynamic software industry.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
