Paycom Is Revolutionizing The Way We Get Paid

Investment Thesis - Paycom is rated as a strong buy due to its innovative cloud-based human capital management solutions that streamline multiple services into one platform, providing significant value to enterprises [11][31]. Competitive Landscape - Paycom has a competitive edge over major players like Automatic Data Processing and Paychex by offering a more advanced, cloud-based solution that integrates various HR processes [11][19]. - The company has a high customer retention rate of approximately 91%, indicating strong satisfaction with its services [7]. Financial Performance - Paycom has achieved a revenue growth CAGR of 31% over the past decade, with recent growth rates above 17% [3]. - Earnings per share (EPS) have grown at a CAGR of 27% over the past five years, supported by share buybacks and a strong balance sheet with zero debt [4]. - Free cash flow (FCF) has grown at a 14% CAGR over the past five years, with expectations for continued double-digit growth as the customer base expands [13]. Valuation - The estimated fair value of Paycom is $218.65, suggesting significant upside potential from the current share price [8]. - Despite strong fundamentals, the stock is trading at low valuations compared to historical levels, which may reflect market mispricing due to growth concerns [23]. Growth Catalysts - The introduction of BETI (Better Employee Transaction Interface) is expected to drive strong sales and improve efficiency, with two-thirds of the customer base already adopting this feature [29]. - Paycom is expanding internationally, having launched its payroll product in the UK, Canada, and Mexico, with plans for further expansion [28]. Market Opportunity - The human capital management industry is projected to grow at a near double-digit CAGR over the next five years, with a significant portion of companies still using offline solutions, presenting a large total addressable market (TAM) for Paycom [27]. - The integration of AI into Paycom's offerings is anticipated to enhance productivity and attract more customers [27].