When Should You Buy Paycom Software, Inc. (NYSE:PAYC)?

Paycom Software, Inc. (NYSE:PAYC) received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$240 at one point, and dropping to the lows of US$199. 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$207 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.

See our latest analysis for Paycom Software

Is Paycom Software Still Cheap?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 12% below our 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 $234.52, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Paycom Software’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Paycom Software?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 6.4% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Paycom Software, at least in the short term.

What This Means For You

Are you a shareholder? PAYC’s future growth appears to have been factored into the current share price, 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 confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on PAYC, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.

If you want to dive deeper into Paycom Software, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 2 warning signs with Paycom Software, and understanding these should be part of your investment process.

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.

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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.