Paycom Software, Inc. (PAYC) DCF Valuation & Fundamental Primer
Paycom Software, Inc. (PAYC) currently trades at $142.19 with an enterprise value of $10.29B. Our proprietary institutional model rates Paycom Software, Inc. at 85/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of 65.2% vs. historical growth of 22.3% (Aggressive Growth Expectations Priced In).
Institutional fundamental teardown of Paycom Software (PAYC) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Paycom Software, Inc. (PAYC) 3-Scenario DCF Valuation Range
Institutional Software Quality Scorecard (85/100 · Grade A)
Strong fundamentals, above-average cash generation, and robust competitive positioning.
Positive FCF but lower conversion efficiency due to capex or timing
Minimal dilution friction; management compensation aligned with shareholders
Elite Tier-1 SaaS compounder with high gross margin and superior Rule of 40
Positive net cash cushion; self-funding operations with zero insolvency risk
Core Investment Strengths & Moats
- Low dilution friction: SBC is only 1.3% of revenue
- Top-quartile software unit economics: 83.3% gross margin and 41.3% Rule of 40 score
- Net cash positive: $318.6M balance sheet buffer
Key Operational & Dilution Risks
Reverse-DCF Solver: What Growth is Priced Into PAYC?
The current share price demands 65.2% 5-year CAGR—a +42.9% acceleration over historical run-rate (22.3%). Any growth slowdown risks valuation multiple contraction.
Paycom Software, Inc. (PAYC) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $1.80B | $1.80B | $2.20B | $2.69B | $3.29B | $4.03B | $4.93B |
| Gross Profit | $1.50B | $1.50B | $1.83B | $2.24B | $2.74B | $3.36B | $4.11B |
| Operating Income (EBIT) | $500.0M | $500.0M | $611.6M | $748.0M | $914.9M | $1.12B | $1.37B |
| Stock-Based Compensation (SBC) | $22.9M | $22.9M | $28.0M | $34.2M | $41.8M | $51.2M | $62.6M |
| Unlevered Free Cash Flow (FCF) | $341.0M | $340.9M | $417.0M | $510.0M | $623.8M | $763.0M | $933.2M |
| SBC-Adjusted True Cash Flow | $318.1M | $318.1M | $389.0M | $475.8M | $582.0M | $711.8M | $870.6M |
Core Enterprise SaaS & ERP Peer Comparables Matrix
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| Paycom Software, Inc. | PAYC | $42.67B | $1.80B | 83.3% | 18.9% | 41.3% | 1.3% | 23.5× |
| ServiceNow, Inc. | NOW | $192.40B | $10.98B | 79.5% | 31.5% | 54.0% | 15.8% | 17.2× |
| Workday, Inc. | WDAY | $38.74B | $2.98B | 74.9% | 20.8% | 41.1% | 17.1% | 12.5× |
| Oracle Corporation | ORCL | $13.08B | $957.1M | 71.9% | 20.4% | 48.0% | 18.2% | 13.4× |
| SAP SE | SAP | $10.73B | $803.6M | 71.7% | 24.9% | 49.5% | 19.6% | 13.0× |
| Intuit Inc. | INTU | $20.52B | $1.98B | 79.4% | 29.9% | 58.2% | 20.5% | 10.0× |
| Adobe Inc. | ADBE | $218.79B | $21.51B | 88.6% | 37.5% | 49.0% | 8.6% | 10.1× |
| Peer Cohort Median Benchmark (N=6) | 77.2% | 27.4% | 49.3% | 17.6% | 12.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 23.5× | $42.35B | $42.67B | $142.19 | 0.0% |
| -20% Multiple Compression | 18.8× | $33.88B | $34.20B | $113.96 | -20.0% |
| -35% Multiple Compression | 15.3× | $27.53B | $27.85B | $92.80 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $9.00B | $9.32B | $31.05 | -78.7% |
Frequently Asked Questions: Paycom Software, Inc. (PAYC) Valuation
What is Paycom Software, Inc. (PAYC)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, Paycom Software, Inc. (PAYC) has a Base Case implied value of $35.35 per share (with a Bear Case of $15.27 and a Bull Case of $64.02), compared to its current price of $142.19. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Paycom Software, Inc. (PAYC)'s Rule of 40 score and Free Cash Flow margin?
Paycom Software, Inc. achieves a Rule of 40 score of 41.3%, combining a 22.3% revenue growth run-rate with a 18.9% TTM free cash flow margin on $1.80B in trailing twelve-month revenue. In the Core Enterprise SaaS & ERP peer cohort, the median Rule of 40 benchmark is 49.3%.
What revenue growth rate is priced into PAYC stock according to Reverse-DCF analysis?
At $142.19 per share (Enterprise Value of $42.35B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 65.2%, compared to Paycom Software, Inc.'s historical CAGR of 22.3%. Overall market expectations are rated as "Aggressive Growth Expectations Priced In".
How does Paycom Software, Inc. compare to Core Enterprise SaaS & ERP software peers?
Paycom Software, Inc. (PAYC) earns an institutional Software Quality Score of 85/100 (Grade A — High-Quality Compounder). Across its Core Enterprise SaaS & ERP peer group (NOW, WDAY, ORCL, SAP, INTU), the cohort trades at a median EV/TTM Revenue multiple of 12.8× and a median gross margin of 77.2%.
How does Stock-Based Compensation (SBC) impact Paycom Software, Inc. (PAYC)'s valuation?
Paycom Software, Inc. recorded $22.9M in TTM stock-based compensation (1.3% of revenue). When treating SBC as a cash-equivalent compensation expense, Paycom Software, Inc.'s SBC-adjusted free cash flow yield is 0.8%, scoring 25/25 on our Shareholder Dilution Friction pillar.