PAYC Stock Study (5-31-26)

Posted by Mark on June 22, 2026 at 07:50 | Last modified: May 31, 2026 11:18

I recently did a stock study on Paycom Software Inc. (PAYC, $139.67). The previous stock study is here.

M* writes:

     > Paycom is a cloud-based human capital management provider
     > offering payroll, compliance, and human resources management
     > solutions. The firm’s solutions are available on a unified,
     > modular platform, and customers are billed for access on a
     > subscription basis. Paycom’s customer base skews toward the
     > midmarket and is primarily based in North America. As of 2025,
     > the firm manages records for 7.4 million employees across
     > more than 20,000 clients on a parent-company-group basis.

Over the past 10 years, this medium-size company has grown sales and earnings at annualized rates of 23.1% and 29.2%, respectively. Lines are up, straight, and parallel except for EPS dips in ’20 and ’25. Value Line (VL) gives an Earnings Predictability score of 95. Shares outstanding decrease 4.9% (0.6%/year).

Over the past 10 years, PTPM leads industry and peer averages while increasing from 17.4% to 30.2% (’25) with a last-5-year mean of 29.0%. ROE also leads peer and industry averages while falling from 32.4% to 25.9% (’25) with a last-5-year mean of 26.6% (shareholder equity consistently positive with a sensational 35.0% CAGR). Having no long-term debt, Debt-to-Capital is much lower than peer and industry averages: last-5-year mean is 5.0%.

Quick ratio is only 0.1 but interest coverage 98.6 per M* who gives “Standard” rating for Capital Allocation and a C grade for Financial Health (per BetterInvesting® website). VL gives a B++ grade for Financial Strength. The latter three ratings have deteriorated since my previous study in May 2024.

With regard to sales growth:

• YF gives YOY ACE 6.7% and 7.1% for ’26 and ’27, respectively (based on 19 analysts).
• Zacks gives YOY ACE 6.7% and 6.9% for ’26 and ’27 (8 analysts).
• VL projects 7.5% per year from ’25-’30.
• CFRA projects 7.2% YOY and per year for ’26 and ’25-’27.
• M* gives 2-year ACE of 7.0% per year and projects 5-year CAGR of 6.3% in Equity Report.

My 6.0% per year forecast is below the range.

With regard to EPS growth:

• MarketWatch gives ACE 11.3% and 11.8% per year for ’25-’27 and ’25-’28, respectively (based on 23 analysts).
• Nasdaq.com gives ACE 21.5% YOY and 16.0% per year for ’27 and ’26-’28 (10 / 8 / 2 analysts for ’26 / ’27 / ’28).
• Seeking Alpha projects 4-year CAGR of 12.6%.
• Finviz gives 5-year annualized ACE of 12.5% (5).
• LSEG projects LTG of 13.7%.
• YF gives YOY ACE 18.2% and 12.6% for ’26 and ’27, respectively (20).
• Zacks gives YOY ACE 15.0% and 12.4% for ’26 and ’27 along with 5-year CAGR of 12.6% (7).
• VL projects 7.9% per year from ’25-’30.
• CFRA projects 16.1% YOY and 15.0% per year for ’26 and ’25-’27 along with 3-year CAGR of 14.0%.
• M* gives long-term ACE 12.8% and projects 5-year CAGR of 10.0% (lower of GAAP/adjusted) in Equity Report.

My 7.0% forecast is below the long-term-estimate range (mean of seven: 11.7%). I will use ’25 EPS of $8.08/share as the initial value rather than 2026 Q1 EPS of $8.65 (TTM).

My Forecast High P/E is 27.0. Over the past decade, high P/E falls from 71.5 to 33.1 (’25) with last-5-year mean of 52.5 (excluding triple digit numbers in ’20 and ’21) and a last-5-year-mean average P/E of 40.3 (excluding low P/E outliers from same two years). I am below the range.

My Forecast Low P/E is 13.0. Over the past decade, low P/E falls from 30.3 to 19.4 (’25) with a last-5-year mean of 28.2. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $105.00 is default based on initial value from above: 24.8% less than previous close and 0.1% above the 52-week low.

Since dividend inception in 2023, the lowest Payout Ratio (PR) is 16.8% (’24). I am forecasting 15.0%.

These inputs land PAYC in the BUY zone with a U/D ratio of 4.8. Total Annualized Return (TAR) is 17.5%.

PAR (using Forecast Average—not High—P/E) of 10.9% is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I start by comparing my inputs with those of Member Sentiment (MS). Based on 80 studies done in the past 90 days (my study and 39 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 8.0%, 8.9%, 26.0, 15.1, and 18.2%, respectively. I am lower except for Forecast High P/E. VL projects a future average P/E of 16.0 that is less than MS (20.7) and less than mine (20.0).

MS high / low EPS are $12.57 / $8.09 versus my $11.33 / $8.08 (per share). My high EPS is less due to a lower growth rate. VL (M*) high EPS of $13.50 ($13.00) is greater than both.

MS LSPF of $103.30 implies a Forecast Low P/E of 12.8: less than the above-stated 15.1. MS LSPF is 15.4% less than the default $8.09/share * 15.1 = $122.16 resulting in more conservative zoning. MS LSPF is also 1.6% less than mine.

MOS is robust in the study because four of five inputs are near or less than historical/analyst/MS averages/ranges. MS TAR exceeding mine by 3.5% supports the assessment.

With regard to valuation, PEG is 1.0 and 2.2 per Zacks and my projected P/E: fairly valued (M* implies extremely undervalued at 0.6). Relative Value [(current P/E) / 5-year-mean average P/E] is fire sale low at 0.40. “Quick and Dirty” DCF method has stock undervalued by 19% while M* (CFRA) reports the stock at a 4% (34%) discount.

Per U/D, PAYC is a BUY right now under $155/share. [305.9 / ((14.27 / 100 ) +1 ) ^ 5] ~ $157 meets the BetterInvesting® TAR criterion given a forecast high price ~$306.

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