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PAYCOM SOFTWARE INC (NYSE:PAYC) – A Strong Contender for Quality Investors

By Mill Chart

Last update: May 22, 2025

PAYCOM SOFTWARE INC (NYSE:PAYC) stands out as a potential candidate for quality investors, based on our Caviar Cruise screening methodology. The company demonstrates strong financial health, profitability, and growth, aligning with key criteria for long-term investment. Below, we examine why PAYC fits the profile of a quality stock.

PAYCOM stock chart

Key Strengths of PAYCOM SOFTWARE INC

  • High Return on Invested Capital (ROIC): PAYC reports an ROIC (excluding cash and goodwill) of 27.09%, well above the 15% threshold for quality stocks. This indicates efficient use of capital to generate profits.
  • Strong Revenue and EBIT Growth: Over the past five years, revenue has grown at an annualized rate of 8.20%, while EBIT growth has been even stronger at 22.90%, signaling improving profitability.
  • Zero Debt: The company has no outstanding debt, with a Debt/Free Cash Flow ratio of 0, reflecting a strong balance sheet and financial flexibility.
  • Profit Quality: PAYC’s five-year average profit quality stands at 84.82%, showing that a significant portion of net income converts to free cash flow.
  • Margins and Efficiency: Operating margins are robust at 27.88%, and the company outperforms most peers in profitability metrics.

Fundamental Analysis Summary

Our fundamental report assigns PAYC a score of 7 out of 10, with high marks for profitability and financial health. Key takeaways:

  • Profitability: Excellent margins (Gross Margin: 82.20%, Operating Margin: 27.88%) and strong returns (ROE: 22.96%, ROA: 8.62%).
  • Valuation: Currently priced at a P/E of 30.59, which is above industry averages, but justified by strong growth and profitability.
  • Growth Outlook: Analysts expect continued revenue growth of 8.20% and EPS growth of 10.16% annually.

For investors seeking high-quality businesses with sustainable growth, PAYC presents a compelling case.

Our Caviar Cruise screener lists more quality stocks and is updated regularly.

Disclaimer

This is not investment advice. Always conduct your own research before making investment decisions.

PAYCOM SOFTWARE INC

NYSE:PAYC (6/20/2025, 8:04:00 PM)

After market: 232.15 0 (0%)

232.15

-0.67 (-0.29%)



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