Assessing Paycom Software's Valuation After Years Of Weak Stock Prices

Wondering if Paycom Software is finally starting to gain value after a few rough years on the market? In this article, we look at whether the current share price is a fair reflection of the company behind the ticker.
Despite a long decline over the past three and five years, with the stock still falling heavily from its highs, recent moves have been more muted. The share price is up 0.7% in the past month and shares are still down 20.4% year to date.
Recent headlines have focused less on the hype and more on its execution, ranging from product updates in the payroll and HR platform to continued efforts to acquire and retain mid-market and larger enterprise customers. At the same time, commentary around competitive pressures in HR technology and investor rotation away from higher growth software names has shaped how the market currently views Paycom.
On our valuation framework, Paycom scores a strong 6/6 as it is undervalued on all six counts. This makes it worth exploring how different valuation approaches fit together here, and whether there’s an even deeper way to think about its true value. We will come back to that at the end of this article.

Find out why Paycom Software’s -23.0% year-to-date return lags its peers.

A Discounted Cash Flow model estimates what a company is worth by projecting the cash it can generate in the future and then discounting these cash flows into dollars.

For Paycom Software, trailing twelve months of free cash flow is approximately $409.8 million. Using a 2-stage free cash flow to equity model, analysts first project detailed cash flows, such as approximately $462.5 million in 2026, rising to an estimated $783 million in 2029. Outside the analyst window, Simply Wall St extrapolates the growth, increasing expected free cash flow to approximately $1.25 billion in 2035, with any future figure discounted back to a present value.

Adding these discounted cash flows yields an estimated intrinsic value of approximately $408.06 per share. Based on this DCF, it appears that the stock is approximately 60.7% undervalued compared to the current share price. This suggests that, under these assumptions, the market is applying a large discount to Paycom’s expected cash generation.

Result: UNDERVALUE

Our Discounted Cash Flow (DCF) analysis shows that Paycom Software is 60.7% undervalued. Follow this in your watchlist or portfolio, or discover 901 more undervalued stocks based on cash flows.

PAYC discounted cash flow as of December 2025

To learn more about how we arrive at this fair value for Paycom software, visit the Valuation section of our company report.

For a profitable, established software company like Paycom, the price-to-earnings (PE) ratio is a useful metric because it connects what investors are paying today to the profits the company is already generating. In general, stronger expected earnings growth and lower perceived risk can justify a higher price-to-earnings ratio, while slower growth or higher risk should drag that multiple down.

Paycom currently trades on a price-to-earnings ratio of about 19.4x, below the professional services industry average of about 24.2x and also below the peer group average of about 22.2x. Simply Wall St’s proprietary Fair Ratio framework goes a step further and estimates what price-to-earnings ratio would be appropriate given Paycom’s earnings growth prospects, margins, sector, market capitalization and risk profile. On this basis, Paycom’s Fair Ratio is higher, at around 24.7x, implying that a typical company with similar fundamentals would have a richer valuation.

Because the Fair Ratio explicitly includes business quality and risk, it is a more tailored benchmark than a simple sector or peer comparison. A comparison with the current price-to-earnings ratio of 19.4x suggests that the market is applying a discount to Paycom’s fundamentals.

Result: UNDERVALUE

P/E ratios tell one story, but what if the real opportunities lie elsewhere? Discover 1,460 companies where insiders are betting on explosive growth.

We mentioned earlier that there is an even better way to understand valuation. That’s why we’d like to introduce you to Narratives, a simple way to connect your view of Paycom’s story to a concrete forecast and real value by writing down what you think about its future earnings, revenues and margins. Simply Wall St’s community page can then turn that story into numbers, comparing fair value to the current share price to indicate whether it looks more like a buy or a sell, and automatically refreshing your story when new news or earnings come in. One investor could build a bullish Paycom story around long-term AI-powered margin expansion and a fair value closer to the most optimistic analyst target of around $310. Another, more cautious investor could focus on slower growth, sector commoditization and macro risks, and achieve a fair value closer to the low target of around $208, both using the same simple tool but telling different data-driven stories.

Do you think there is more to the story for Paycom Software? Check out our community to see what others are saying!

This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.

Companies discussed in this article include PAYC.

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