Stock Analysis

Is Now The Time To Look At Buying Paycom Software, Inc. (NYSE:PAYC)?

NYSE:PAYC
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Paycom Software, Inc. (NYSE:PAYC) saw significant share price movement during recent months on the NYSE, rising to highs of US$352 and falling to the lows of US$267. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Paycom Software's current trading price of US$273 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Paycom Software’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Paycom Software

What Is Paycom Software Worth?

According to my valuation model, Paycom Software seems to be fairly priced at around 13% below my intrinsic value, which means if you buy Paycom Software today, you’d be paying a fair price for it. And if you believe the company’s true value is $314.18, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Paycom Software’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Paycom Software generate?

earnings-and-revenue-growth
NYSE:PAYC Earnings and Revenue Growth May 8th 2023

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Paycom Software's earnings over the next few years are expected to increase by 83%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in PAYC’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on PAYC, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that Paycom Software has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in Paycom Software, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Valuation is complex, but we're helping make it simple.

Find out whether Paycom Software is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.