Is Paycom Software a Bargain After New Market Expansion and Product Updates in 2025?

• Curious if Paycom Software is a hidden bargain or just another tech name in the cloud? You are not alone, and the answer is more interesting than you might expect.

• The stock has seen a fair share of ups and downs lately, with a notable 9.0% gain over the past year but a drop of 7.9% just last week.

• Recent headlines highlight Paycom’s ongoing partnerships and continued investment in product development, both of which have sparked new conversations around its competitive position. News about expansion into new markets and updates to its workforce management tools have made investors take a fresh look at both risk and opportunity.

• On our valuation checks, Paycom scores a perfect 6 out of 6, which means it’s undervalued in every way we measure. But traditional valuation methods only tell part of the story. Let’s dig into how we arrive at these scores and why a more holistic approach is worth your attention by the end of this article.

Paycom Software delivered 9.0% returns over the last year. See how this stacks up to the rest of the Professional Services industry.

The Discounted Cash Flow (DCF) model calculates what a company is worth today based on its expected future cash flows. It projects future Free Cash Flow (FCF) and then discounts those amounts back to their present value, giving investors an estimate of intrinsic value using cash flow projections rather than noisy short-term results.

For Paycom Software, the most recent annual Free Cash Flow stands at approximately $350 Million. Analysts forecast that this figure will grow substantially, with estimates projecting $779 Million by 2029. Since analyst estimates are typically only available for the next few years, projections beyond that are extrapolated and extend up to 2035 based on historical trends and internal models.

According to this DCF model, the intrinsic value per share works out to $392.72. This represents a 52.5% discount compared to the current market price, indicating that Paycom Software could be significantly undervalued if these cash flow projections are accurate and realized.

In summary, the DCF approach suggests Paycom Software’s current share price is well below its estimated worth. For investors seeking value, this could be an attractive opportunity.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Paycom Software is undervalued by 52.5%. Track this in your watchlist or portfolio, or discover 849 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Paycom Software.

The Price-to-Earnings (PE) ratio is one of the most widely used tools for valuing profitable companies because it reflects how much investors are willing to pay today for a dollar of a company’s earnings. For companies like Paycom Software that generate meaningful profits, the PE ratio helps investors quickly gauge valuation in the context of both the company’s performance and broader market trends.

Generally, a company with higher growth expectations or lower risk will command a higher “normal” or “fair” PE ratio, while slower-growing or riskier companies typically see lower PE multiples. It is important to compare not just against similar firms but also to take into account key fundamentals that shape what constitutes a reasonable multiple.

Currently, Paycom Software trades at a PE ratio of 25x. This is almost exactly in line with the industry average of 25x and sits just below its peer group average of 27x. However, Simply Wall St’s proprietary “Fair Ratio” for Paycom Software is calculated at 27x. The Fair Ratio incorporates factors such as the company’s profit margins, growth prospects, market cap, its place in the Professional Services industry, and relevant business risks, making it a more holistic benchmark than a simple peer or sector comparison.

Because Paycom Software’s current PE ratio is within 0.10 of its Fair Ratio, this suggests the stock’s price is closely aligned with what our comprehensive analysis considers fair value.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1380 companies where insiders are betting big on explosive growth.

Earlier, we noted that there is an even better way to understand valuation, so let us introduce you to Narratives. This approach brings your perspective, or “story,” to life alongside the numbers. A Narrative connects your view on a company’s future and the assumptions you believe are most relevant directly to your forecasts for revenue, earnings, margins, and ultimately what you think the company is truly worth.

Simply Wall St makes Narratives easy and accessible for everyone in the Community page, letting millions of investors quickly express their thesis, see others’ reasoning, and revisit their analysis as new data arrives. Narratives go beyond static metrics by linking the company’s journey, whether it be product launches, management decisions, or market shifts, to real financial expectations and a fair value, all in one place.

With Narratives, you can compare what you believe is Paycom Software’s Fair Value with the latest Price, and each Narrative adjusts automatically when fresh information like news, earnings, or major industry changes is released. For example, one investor with high confidence in Paycom’s AI-driven growth sees a Fair Value of $310 per share, while another, more cautious about competitive risks, values it at $208. Both perspectives are captured and updated in real time using Narratives.

Do you think there’s more to the story for Paycom Software? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include PAYC.

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