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Quote this valuation with its source: Fair value, Potential value and the price at analysis.
FAQ
PAYC — frequently asked questions
Is Paycom Software, Inc. overvalued?
In our latest published analysis dated 2026-10-14, PAYC looks modestly undervalued. The price recorded at analysis is 239 USD versus our fair value of 259 USD; the high endpoint is presented separately as potential value of 295 USD. That implies roughly 8.5% upside to fair value at that date.
Our latest published report, analyzed 2026-10-14, gives PAYC a fair value of 259 USD and a potential value of 295 USD. The conclusion is triangulated across multiple valuation models and weighted by reliability for Paycom Software, Inc.'s archetype; it is a dated research output, not a live price.
Should I buy PAYC now?
Our latest published rating for PAYC, analyzed 2026-10-14, is Hold. Paycom Software, Inc. looks modestly undervalued at the analysis-date price of 239 USD versus fair value of 259 USD; potential value is 295 USD. This is research for educational purposes, not personalized investment advice.
What are the biggest risks for PAYC?
The dedicated bear-case section in our report analyzed 2026-10-14 documents Paycom Software, Inc.'s material risks, evidence, thresholds, and thesis-invalidation conditions. Scenario-specific explanations remain in that section so the report does not repeat or decontextualize them elsewhere.
What is PAYC's rating?
Our latest published rating for PAYC, analyzed 2026-10-14, is Hold, with a published moat assessment of 7.5/10 (Narrow). It reflects our fair value of 259 USD, the potential value of 295 USD, and the price recorded at analysis (239 USD).
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§1 Resumen ejecutivoEN
Respuesta en 30 segundosHold
Precio frente a valor
Precio
$239.00
Valor razonable
$259.38
Valor potencial
$294.78
A fecha de
2026-10-14
Por qué puede funcionar
Acceleration in sales representative ramp productivity and enterprise adoption of Beti self-service payroll, unlocking recurring revenue growth above 9% and expanding operating margins past 30%, which would push valuation toward Potential value of $294.78.
Qué cambiaría nuestra opinión
The primary risk trigger is a macroeconomic deceleration in employment growth or corporate layoffs across mid-market clients.
We maintain a Hold rating on Paycom Software Inc. with a Fair value of $259.38 per share, representing 8.53% upside from the report-date share price of $239.00 on October 14, 2026.4
We rate Paycom Software Inc. as a Hold. For investors, this rating indicates that existing positions should be maintained rather than expanded, as the current risk-reward profile offers modest valuation upside that does not yet provide an adequate margin of safety for new capital allocation.4
On October 14, 2026, the report was prepared at a share price of $239.00. The house valuation concludes with a Fair value of $259.38 per share and a Potential value of $294.78 per share. The report-date price sits 7.86% below Fair value, offering 8.53% implied upside, with Potential value providing up to 23.34% upside if sales execution and operational leverage accelerate.4
The primary risk to this outlook is a slowdown in client employment growth or broader macroeconomic workforce reductions. Because Paycom bills clients on a per-employee-per-month basis across its core recurring software base ($1,912.7 million in fiscal 2025), client hiring freezes or layoffs directly reduce billing volume and curb organic expansion, threatening to compress top-line revenue growth below the guided 7% to 8% range.5,8
The strongest catalyst supporting intrinsic value is the inflection in free cash flow resulting from normalizing capital expenditures and internal operational efficiencies. After investing over $100 million into proprietary artificial intelligence data center infrastructure in fiscal 2025, Paycom is capturing over $130 million in annual cost savings across research and external compute fees. With capital spending guided to drop to approximately 6% of revenue, free cash flow is projected to exceed $650 million in fiscal 2026, lifting cash generation per share.5
Free cash flow is guided to exceed $650 million in fiscal 2026, recovering sharply from $408.0 million in fiscal 2025 as data center capital spending normalizes from peak levels to roughly 6% of revenue.5,6
Recurring and other revenues represented $1,938.7 million of $2,051.7 million total revenue in fiscal 2025, providing predictable multi-year subscription cash generation.7,8
Proprietary AI Operational Efficiencies
Internal deployment of proprietary AI models in owned infrastructure generates over $100 million in annual research and development savings and over $30 million in eliminated third-party compute fees.5
Recomendación de la casa
We rate Paycom Software Inc. as Hold because solid recurring subscription cash flows and expanding operational leverage are balanced by single-digit top-line growth and a modest 8.53% upside to our Fair value of $259.38.
Descripción general de la empresa
Paycom Software Inc. provides cloud-based human capital management software delivered as a single, comprehensive application. The company's platform handles the complete employment life cycle from recruitment to retirement, encompassing payroll processing, talent acquisition, time and labor management, human resources management, and talent management applications.
The company sells its solutions exclusively through an internal, captive sales organization organized geographically across the United States. Its sales teams include field sales personnel targeting mid-sized businesses, client relations representatives who sell additional software applications to existing clients, and emerging markets teams focusing on businesses with fewer than 65 employees. As of early 2026, Paycom operated 58 sales teams located across 29 states.
Paycom trains its sales force through intensive, structured programs covering accounting, business metrics, software functionality, and tax compliance matters relevant to employers. Ongoing education includes weekly strategy sessions and regular in-person training to keep teams updated on product development, legislative updates, and competitive dynamics.
§2 Caso bajistaEN
In a severe stress test combining macro employment contraction and ongoing hardware refresh needs, Paycom's growth and margin trajectory would deteriorate markedly. If macro layoffs compress recurring revenue growth to 2.5% and data center depreciation causes operating margins to contract below 25.0%, annual free cash flow would fail to cross $500 million, falling well short of guided expectations. Under this scenario, compressed cash flows and valuation multiple compression toward 14.4x forward earnings would reduce intrinsic value toward $205.18 per share.
In the downside scenario, macroeconomic workforce reductions or persistent hiring freezes reduce client headcount and lower per-employee billing volumes. Concurrently, competitive discounting from legacy payroll providers pressures client retention, while proprietary data center infrastructure incurs recurring hardware refresh costs that prevent sustained capital expenditure normalization. This qualitative stress path outlines the risks to our baseline compounder thesis without competing with the house valuation conclusion.
Cómo puede fallar esta tesis
AI Data Center Refresh Escalation and Operating Cost Overrun
FY2025 EBIT margin was 27.65% on EBIT of $567.2M. If data center operating costs and software depreciation escalate above guided levels rather than producing $130M in projected net savings, operating margin falling below 25.0% compresses terminal earnings and cash conversion.5,7
FV impact
0%
Operating margin 3 points lower throughout
Trigger
Señales de alerta temprana a vigilar
Los cinco acontecimientos que debilitarían nuestra tesis de inversión.
Paycom possesses a Narrow economic moat grounded in high customer switching costs and a proprietary single-database platform architecture. In fiscal 2025, recurring revenue reached $1,912.7 million, while recurring and other revenue totaled $1,938.7 million out of $2,051.7 million total revenue, demonstrating that over 94% of the business is contractually recurring. By integrating payroll, tax filing, time tracking, and benefits administration into a unified system with no third-party database connectors, Paycom deeply embeds its technology into customer operations.
The operational barrier to switching away from Paycom is substantial. Displacing a core human capital management and payroll system requires extensive data migration, risk of regulatory payroll penalties, and employee retraining across the entire workforce. The company's automated Beti payroll module further increases customer stickiness by transferring error resolution to employees before payroll submission, generating measurable return on investment for clients. These switching barriers support strong customer retention and multi-year contract renewals.
However, Paycom's moat is bounded to a Narrow rating rather than Wide. The company faces stiff competition from entrenched payroll incumbents and modern enterprise cloud vendors, while client employment expansion within existing customers has stabilized. Furthermore, Paycom operates without significant pricing power over industry standards, capping the economic rent extraction capability typical of Wide-moat software franchises.
Beneficio económico
Paycom generates returns on invested capital well above its estimated moderate cost of equity of 9.40%. In fiscal 2025, operating income (EBIT) reached $567.2 million on revenue of $2,051.7 million, representing an operating margin of 27.65%. High recurring cash generation and capital discipline generate meaningful economic profits that support our 10-year moat fade assumption.2,7
7.5/ 10
Narrow
Sources of advantage
01High Customer Switching Costs — Core payroll and tax processing workflows involve critical compliance and operational disruption risks upon migration, sustaining recurring revenue of $1,912.7 million in fiscal 2025.Wide
02Proprietary Integrated Single-Database Architecture — Paycom's unified codebase eliminates fragile third-party integrations and enables proprietary self-service tools like Beti, delivering higher operational return on investment to employers.Moderate
03Captive Distribution and Direct Sales Network — Operating 58 captive sales teams across 29 states provides direct customer access without third-party distributor leakage.
Amenazas conocidas al foso
Amenaza
Severidad
Cronograma
Mitigación
Aggressive Price Competition from Legacy and Cloud Payroll Vendors
medium
12 to 24 months
Paycom counters pricing pressure through proprietary features such as Beti self-service payroll that lower administrative overhead and deliver clear client return on investment.5
The highlighted cell is Fair value when every assumption sits at its base level ($259.38). Each row and column shows what Fair value becomes when one assumption moves.
Operating margins expand as internal automation efficiencies materialize
Under the base case, Paycom delivers steady recurring revenue growth supported by stable client employment and ongoing territory expansion. Capital spending normalizes as planned, enabling free cash flow expansion and disciplined share repurchases. This path yields our Fair value target of $259.38 (representing $259.38), with an assigned probability of 55.0% and an expected return of 8.5% against the analysis share price of $239.00.
Sales representative ramp times accelerate bookings growth across regional offices
Beti adoption expands client return on investment and reduces customer churn
Proprietary AI data center operations generate substantial recurring cost savings
Under the upside case, new sales representative cohorts reach quota productivity faster than expected, accelerating new client bookings across enterprise accounts. High adoption of Beti self-service payroll drives client expansion, while internal artificial intelligence data center infrastructure delivers greater operational efficiencies. This trajectory supports our target of $294.78 (Potential value $294.78), carrying an assigned probability of 20.0% and an implied return of 23.3% relative to the analysis share price $239.00.
§7 Árbol de decisión de resultadosEN
Superado
Upgrade the rating; Re-evaluate allocation toward an overweight stance if sales capacity expansion demonstrates sustained quota productivity across regional territories.
Disparador: Recurring and other revenue growth exceeding the upper end of management full-year guidance alongside adjusted operating margins expanding beyond guided levels
A decisive beat driven by accelerating new sales representative productivity and enterprise Beti module adoption would prove revenue re-acceleration, elevating the earnings trajectory toward the potential value target $294.78.
En línea
Maintain Hold; Hold current position sizing and monitor sales representative ramp times and client headcount stability.
An inline quarterly outcome confirms the steady compounder thesis, supporting our house fair value conclusion of $259.38 with implied return of 8.5% from the analysis share price $239.00.
Fallo
Downgrade the rating; Trim position sizing and reassess customer retention metrics and terminal multiple assumptions.
A miss caused by client layoffs reducing per-employee fees or persistent data center infrastructure overhead would falsify our margin expansion assumptions, narrowing intrinsic value and requiring a rating downgrade.
Calidad de los beneficios
Earnings quality is supported by recurring subscription billings and strong cash flow conversion. Operating cash flow consistently exceeds net income, driven by low bad-debt expense and disciplined working capital management. Capital expenditure requirements are moderating following prior data center hardware investments, supporting healthy free cash conversion without aggressive revenue recognition or capitalization of development costs.
Evolución de las estimaciones
Consensus estimate revisions have moved higher following second quarter results, reflecting management raised revenue outlook and expanding operating leverage in data center operations.
With fiscal 2025 EBIT of $567.2 million on revenue of $2,051.7 million (27.65% operating margin), Paycom generates strong economic profits. As capital intensity moderates from 13.2% in fiscal 2025 toward 6% in 2026, capital efficiency and returns on invested capital will expand further.
Paycom's return on capital substantially exceeds its estimated cost of equity of 9.40%.
Fiscal 2025 capex of $270.9 million (1.56x depreciation) is guided to normalize to approximately 6% of revenue in fiscal 2026.
Ingresos más recientes2051,7 M US$CAGR de ingresos +22,5 %
Margen operativo27,6 %10 periodos fiscales
Flujo de caja libre más reciente408 M US$FY2025
Caja neta217,8 M US$FY2025
Desglose de la cuenta de resultadosCómo la escala del negocio se convierte en beneficio declarado.
StockMarketAgent.AI
Ingresos2051,7 M US$Coste de ventas−345,4 M US$Beneficio bruto1706,3 M US$Gastos operativos−1139,1 M US$Beneficio operativo567,2 M US$Partidas no operativas e impuestos−113,8 M US$Beneficio neto453,4 M US$
Datos del historial financiero
Ingresos
2.051.700.000 US$
Coste de ventas
345.400.000 US$
Beneficio bruto
1.706.300.000 US$
Gastos operativos
1.139.100.000 US$
Beneficio operativo
567.200.000 US$
Partidas no operativas e impuestos
-113.800.000 US$
Beneficio neto
453.400.000 US$
Resumen del balanceCómo se mantienen y financian los activos declarados en el período seleccionado.
StockMarketAgent.AI
Composición de activosFinanciado por
Activos totales7598,7 M US$Efectivo370 M US$Activos corrientes5838,8 M US$Pasivos totales5867,2 M US$Pasivos corrientes5368,4 M US$Patrimonio neto1731,5 M US$
Datos del desglose del balance
Activos totales
7.598.700.000 US$
Efectivo
370.000.000 US$
Activos corrientes
5.838.800.000 US$
Pasivos totales
5.867.200.000 US$
Pasivos corrientes
5.368.400.000 US$
Patrimonio neto
1.731.500.000 US$
Puente de flujo de cajaCómo el flujo de caja operativo se convirtió en flujo de caja libre en FY2025.
StockMarketAgent.AI
Conciliación del flujo operativo
Beneficio neto453,4 M US$Depreciación y amortización+176,3 M US$Compensación basada en acciones+118,7 M US$Otros ajustes operativos−69,5 M US$Flujo de caja operativo678,9 M US$
Conciliación del efectivo inicial al final
Efectivo inicial4042,8 M US$Flujo de caja operativo+678,9 M US$Flujo de inversión−611,2 M US$Flujo de financiación+1022 M US$Efectivo final5132,5 M US$
678,9 M US$ − 270,9 M US$Flujo de caja libre 408 M US$
Datos del puente de flujo de caja
Beneficio neto
453.400.000 US$
Entrada operativa
748.400.000 US$
Depreciación y amortización
176.300.000 US$
Compensación basada en acciones
118.700.000 US$
Flujo de caja operativo
678.900.000 US$
Salida operativa
69.500.000 US$
Efectivo disponible
5.743.700.000 US$
Efectivo inicial
4.042.800.000 US$
Entrada de financiación
1.022.000.000 US$
Salida de inversión
611.200.000 US$
Capex
270.900.000 US$
Otras actividades de inversión
340.300.000 US$
Efectivo final
5.132.500.000 US$
Flujo de inversión
-611.200.000 US$
Flujo de financiación
1.022.000.000 US$
Ingresos y beneficiosCómo la escala del negocio se convierte en beneficio declarado.
Efectivo y deudaLiquidez disponible frente al endeudamiento total.
Generación de efectivoFlujo de caja operativo frente al flujo de caja libre.
RentabilidadEvolución de los márgenes bruto, operativo y neto.
Datos financieros puntuales utilizados en el análisis del 2026-10-14.
Datos del historial financiero
Período
Ingresos
EBITDA
Beneficio neto
Flujo de caja operativo
Flujo de caja libre
Capex
Depreciación y amortización
Compensación basada en acciones
Recompras de acciones
Dividendos pagados
Emisión neta de deuda
Flujo de inversión
Flujo de financiación
Efectivo inicial
Efectivo final
Efectivo e inversiones
Deuda total
Margen operativo
ROIC
WACC
Diferencial ROIC−WACC
2016-12-31
329,1 M US$
115,7 M US$
70,4 M US$
98,8 M US$
55 M US$
43,8 M US$
13,6 M US$
20,7 M US$
35,6 M US$
0 US$
—
-204,9 M US$
115,5 M US$
—
807,5 M US$
60,2 M US$
29,8 M US$
30,9 %
—
8,3 %
—
2017-12-31
433 M US$
148 M US$
123,5 M US$
130,1 M US$
70,8 M US$
59,4 M US$
19,4 M US$
36,1 M US$
56,9 M US$
0 US$
—
15,6 M US$
145,7 M US$
807,5 M US$
1098,9 M US$
46,1 M US$
35,3 M US$
30,0 %
—
8,3 %
—
2018-12-31
566,3 M US$
205,1 M US$
137,1 M US$
184,8 M US$
124,9 M US$
59,9 M US$
29,7 M US$
36,6 M US$
105,2 M US$
—
—
-49,4 M US$
-247,8 M US$
1098,9 M US$
986,5 M US$
45,7 M US$
34,4 M US$
30,7 %
—
9,1 %
—
2019-12-31
737,7 M US$
269,2 M US$
180,6 M US$
224,3 M US$
131,3 M US$
92,9 M US$
42,2 M US$
47,3 M US$
—
—
—
-219,5 M US$
650,7 M US$
986,5 M US$
1641,9 M US$
133,7 M US$
32,6 M US$
30,7 %
—
7,2 %
—
2020-12-31
841,4 M US$
239,3 M US$
143,5 M US$
227,2 M US$
133,1 M US$
94,1 M US$
53,4 M US$
90,1 M US$
52 M US$
—
—
-117,9 M US$
-165,9 M US$
1641,9 M US$
1585,3 M US$
151,7 M US$
30,9 M US$
22,1 %
—
8,0 %
—
2021-12-31
1055,5 M US$
323,2 M US$
196 M US$
319,4 M US$
198,7 M US$
120,7 M US$
67,2 M US$
97,5 M US$
—
0 US$
—
-257,7 M US$
165,7 M US$
1585,3 M US$
1812,7 M US$
278 M US$
29,2 M US$
24,0 %
—
8,4 %
—
2022-12-31
1375,2 M US$
484,8 M US$
281,4 M US$
365,1 M US$
232,4 M US$
132,7 M US$
92,7 M US$
94,9 M US$
94,7 M US$
0 US$
-300 mil US$
-23,3 M US$
254,6 M US$
1812,7 M US$
2409,1 M US$
400,7 M US$
29 M US$
27,5 %
—
10,5 %
—
2023-12-31
1693,7 M US$
588,2 M US$
340,8 M US$
485 M US$
292,4 M US$
192,6 M US$
113,9 M US$
129,8 M US$
286,6 M US$
64,8 M US$
-29 M US$
-196,7 M US$
-274,6 M US$
2409,1 M US$
2422,8 M US$
294 M US$
75,9 M US$
26,6 %
—
10,4 %
—
2024-12-31
1883,2 M US$
798,3 M US$
502 M US$
533,9 M US$
341 M US$
192,9 M US$
145,9 M US$
-22,9 M US$
122,8 M US$
84,8 M US$
0 US$
-22,2 M US$
1108,3 M US$
2422,8 M US$
4042,8 M US$
402 M US$
83,4 M US$
33,7 %
—
11,0 %
—
2025-12-31
2051,7 M US$
799,1 M US$
453,4 M US$
678,9 M US$
408 M US$
270,9 M US$
176,3 M US$
118,7 M US$
325,5 M US$
84,8 M US$
0 US$
-611,2 M US$
1022 M US$
4042,8 M US$
5132,5 M US$
370 M US$
152,2 M US$
27,6 %
—
8,8 %
—
§9 Comparación de valoración con pares
Valor razonableReport-date price
Paycom Software, Inc.PAYC
Precio / valor razonable
Valor razonable259,38 US$Report-date price239 US$
Fecha de evaluación
Ventaja competitivaNarrow
Cuadro de mando de inversión68 / 100
Tyler Technologies, Inc.TYL
Precio / valor razonable
Valor razonable323,81 US$Report-date price339,87 US$
Fecha de evaluación
Ventaja competitivaWide
Cuadro de mando de inversión65 / 100
Roper Technologies, Inc.ROP
Precio / valor razonable
Valor razonable410,13 US$Report-date price354,32 US$
Paycom Software Inc. (PAYC) trades at 16.7x forward earnings against a peer median of 18.5x. Its EV/EBITDA of 15.3x compares with a peer median of 17.0x. The comparison uses 4 peers: Tyler Technologies Inc., Fair Isaac Corporation, Roper Technologies Inc. and PTC Inc., as of 2026-10-14.
§10 Industria y cicloEN
Fase del ciclo
Contraction
Broader technology software industry benchmarks indicate elevated capital intensity with an industry capex-to-revenue ratio of 17.8% and capex-to-depreciation of 2.45x. In contrast, Paycom completed its heavy data center buildout in fiscal 2025 ($270.9 million capex) and is contracting capital intensity to approximately 6% of revenue in fiscal 2026.5,7
Ciclo alcista
In an industry upcycle characterized by robust corporate hiring and technology modernization, demand for unified human capital management platforms expands. Businesses consolidate disparate point solutions to reduce compliance errors and administrative overhead, driving accelerated client additions and higher adoption of automated payroll modules such as Beti.
Ciclo bajista
In an industry downcycle marked by corporate hiring freezes and white-collar headcount reductions, per-employee-per-month billing volumes stagnate across enterprise and mid-market accounts. Furthermore, enterprise software procurement scrutiny lengthens sales cycles, slowing new client acquisitions and capping industry revenue growth to low single digits.
Tendencias seculares
Tendencia
Impacto
Nota
Consolidation into Single-Database Cloud HCM Architectures
positive
Organizations are abandoning fragmented human resource point solutions in favor of unified, single-database cloud systems that eliminate data synchronization errors.
Employee Self-Service and Automated Payroll Workflows
positive
Enterprises are adopting self-service payroll applications like Beti, which transfers pre-payroll verification directly to employees and lowers employer processing costs.
Posicionamiento
Paycom is well positioned in the mid-market and expanding into enterprise accounts through its proprietary single-database solution. Unlike legacy providers that rely on patched acquisitions, Paycom's internally developed application provides superior data integrity, insulating it from competitive displacement even as market growth moderates.5
§11 Gestión de posiciónEN
Tamaño de posición
Under a Hold rating, no new capital commitment or position additions are recommended. Existing long-term compounder positions should be maintained at current portfolio weightings, while prospective investors should wait for a wider margin of safety or clear signs of top-line re-acceleration before initiating new exposure.
Riesgo
Risk management focuses on monitoring customer employment growth and macroeconomic hiring trends. Because Paycom's billing is tied to employee headcount, broad economic slowdowns represent the primary fundamental threat. Portfolios should avoid overconcentration, capping PAYC exposure at a standard core holding size (2% to 3%) while enforcing strict rebalancing as shares approach Potential value ($294.78).
Tramos de entrada
Nivel
Acción
Por qué
$215.00 to $220.00
Initiate initial position
Provides an entry discount of approximately 15% to 17% below our Fair value of $259.38, establishing an attractive margin of safety for long-term compounding.
$200.00 to $205.00
Accumulate secondary tranche
Aligns with the conservative owner earnings and bear valuation support levels, offering superior risk-adjusted asymmetric upside.
Tramos de salida
Nivel
Acción
$260.00 to $265.00
Trim 25% of position
$290.00 to $295.00
Trim additional 50% of position as valuation approaches Potential value ($294.78)
Re-evaluate revenue forecast path and reassess client retention trends if growth drops below threshold.5
§12 Perspectivas de inversoresEN
Fundamental Perspective
Hold
Paycom is an exceptional compounder with over 94% recurring revenue and an inflection in free cash flow to >$650 million. However, top-line growth of 7% to 8% is already reflected in the report-date valuation, warranting a Hold.5,8
Valuation Perspective
Hold
At $239.00 as of October 14, 2026, shares offer an 8.53% implied return to our Fair value of $259.38. This modest upside falls within our neutral band, recommending retention of existing holdings without fresh capital deployment.4
Bear Perspective
Avoid
The bear perspective centers on client employment stagnation or white-collar layoffs reducing per-employee billing volumes ($1,912.7 million in recurring revenue in FY2025).5,8
§14 Recomendación finalEN
Acción
Mantener
We recommend investors Hold Paycom Software Inc. shares. The company maintains formidable competitive strength in integrated cloud payroll with >94% recurring revenue and is entering a highly accretive free cash flow inflection as capital expenditures normalize to ~6% of revenue.5,8
With shares trading at $239.00 against our Fair value of $259.38 (8.53% upside), current pricing fairly reflects near-term operational momentum. Investors should hold existing positions and wait for pullbacks toward $215.00-$220.00 before allocating additional capital.
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Sources
The records this analysis drew on, as they stood when it was run.
Analyst consensusData as of 2026-10-14 · Published 2026-10-14 · Provider-adjusted · cited for 1 figureCited in Caso bajista
Not every cited input appears here: internal calculations and intermediate model outputs have no external record, and some citations could not be matched to one.
Management guidance assumes recurring and other revenue growth of 8% to 9% with stable client employment. If macro layoffs reduce PEPM fees and new sales rep productivity stalls, revenue growth falling 500 bps over 5 years severely damages compound intrinsic value.5
FV impact
-0.8%
Revenue and EPS growth 5 points lower for five years
Trigger
Within 18 months
SaaS Multiple Derating on Competitive Maturity and Moat Compression
Reveals sales capacity bottlenecks and diminishing returns on sales representative hiring.
Actual:7.67% projected in FY2026
Alerta sibelow 6.0%
05
gross_margin
Points to aggressive pricing discounts or concessions granted to counter competitive pressure from legacy and cloud payroll vendors.
Actual:85.1% peer benchmark reference
Alerta sibelow 82.0%
Moderate
Prolonged Client Headcount Stagnation
medium
6 to 18 months
The company is expanding field sales capacity and cross-selling additional software modules to existing accounts through client relations representatives.5
Escalation in Hardware Refresh and AI Infrastructure Costs
low
24 to 36 months
Infrastructure buildouts in fiscal 2025 created reserve compute capacity, allowing capital expenditures to normalize toward approximately 6% of revenue.5
Paycom's capital allocation strategy prioritizes reinvestment in proprietary infrastructure followed by share repurchases. In fiscal 2025, the company deployed significant capital to build owned data centers capable of hosting internal AI models, an initiative that now yields over $130 million in operational annual savings. The company operates with minimal debt and uses surplus free cash flow primarily for share buybacks rather than common dividends, effectively reducing share dilution from stock-based compensation (guided at 3% of revenues in fiscal 2026).
Free cash flow will surge from $408.0 million in fiscal 2025 to over $650 million in 2026, significantly enhancing cash conversion.
Proprietary AI Data Centers Deliver Over $130 Million in Operational Savings
Upfront investment of over $100 million in 2025 yields $100 million in recurring annual R&D savings and $30 million or more in eliminated third-party fees.
Expands operating margin toward 28.0% in fiscal 2026 and supports our long-term terminal operating margin expectation of 29.5%.
Recurring and other revenues reached $1,938.7 million in fiscal 2025, with recurring revenue alone at $1,912.7 million.
Insulates operating performance against macroeconomic cyclicality and provides reliable recurring cash inflows.
PTC Inc.PTC
Precio / valor razonable
Valor razonable150,71 US$Report-date price194,45 US$
Fecha de evaluación
Ventaja competitivaWide
Cuadro de mando de inversión61 / 100
Margen
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Monetary Easing and Declining Float Yields
negative
Interest earned on funds held for clients faces downward pressure as short-term policy interest rates decline, with guidance projecting a drop from $113 million in fiscal 2025 to $105 million in 2026.