Riding High: Paycom Software

Shares of Paycom Software Inc. (PAYC) are up over 50% year-to-date compared to a modest 18% rise by Dow Jones U.S. Software Index for the same period.

Paycom Software is a provider of comprehensive, cloud-based human capital management software delivered as Software-as-a-Service.

Human capital management, or HCM, is an approach to employee staffing that perceives people as assets (human capital) whose current value can be measured and whose future value can be enhanced through investment. (Source: TechTarget). HCM comprises of various processes such as recruitment, training, scheduling, payroll, performance management and benefits planning. (Source: FinancialForce).

IT research agency, International Data Corp., has estimated that the U.S. market for HCM applications (excluding payroll services and expense management) will total $8.8 billion in 2017.

According to the Company, its user-friendly software allows for easy adoption of its solution by employees, enabling self management of their HCM activities in the cloud, which reduces the administrative burden on employers and increases employee productivity.

Paycom’s HCM solution finds applications in talent acquisition, time and labor management, payroll, talent management and HR management. The Company serves over 17,800 clients of diverse nature.

Paycom derives most of its revenue from payroll processing. The U.S. market for payroll services will be $17.7 billion in 2017, estimates the IDC.

There has been year-over-year growth in the Company’s revenue and earnings. Based on its total revenues, Paycom has grown at about 44% CAGR from January 1, 2012 through December 31, 2016. The Company, which reported a loss in 2012, reversed to profit the following year and has been improving its profitability since then.

Metrics 2012 2013 2014 2015 2016
Total revenues $76.8Mln $107.6Mln $150.9Mln $224.6Mln $329Mln
Net income(loss) ($406)K $607K $5.7Mln $20.9Mln $43.8Mln
EPS ($0.01) $0.01 $0.11 $0.36 $0.74

Momentum continues…

In the first quarter…

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