For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Paycom Software, Inc.’s (NYSE:PAYC) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers.
Did PAYC’s recent earnings growth beat the long-term trend and the industry?
PAYC’s trailing twelve-month earnings (from 31 December 2019) of US$180m has jumped 32% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 44%, indicating the rate at which PAYC is growing has slowed down. What could be happening here? Well, let’s examine what’s going on with margins and whether the whole industry is experiencing the hit as well.
In terms of returns from investment, Paycom Software has invested its equity funds well leading to a 34% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 7.4% exceeds the US Software industry of 6.7%, indicating Paycom Software has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Paycom Software’s debt level, has declined over the past 3 years from 57% to 31%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Paycom Software gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Paycom Software to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PAYC’s future growth? Take a look at our free research report of analyst consensus for PAYC’s outlook.
- Financial Health: Are PAYC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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