Value
4.7/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 4.5 |
| P/S | 6.5 |
| EV/EBITDA | 1.6 |
| Fwd P/E | 6.7 |
| PEG | 5.4 |
| Analyst target | 3.0 |
- ▸Forward P/E: 19.2x
- ▸PEG: 1.39
PAYC · Why this verdict
Why Paycom Software (PAYC) is rated HOLD
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results. How we score · Editorial policy
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VerdictHOLD
Overall score5.7/10
ConfidenceMEDIUM
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
Paycom Software posts best-in-class margins with 22% net margin and 37% return on equity — ranking superior to peers on both metrics — yet trades near its analyst target with only 1.2% upside remaining and a death cross that makes new entry unattractive at this level.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Paycom sustains a dividend with 111% coverage, demonstrating that cash generation is sufficient to fund shareholder returns even as the company invests in growth. Catalyst breakdown | Dividend payout is maintained or raised over the next 4 quarters without a cut, confirming the cash generation floor. | ↑Improving |
| CounterWith only 63% free cash flow relative to net income and a Rule of 40 score of 22, the underlying cash quality is weaker than the headline dividend coverage suggests. | ||
Paycom generates a 22% net margin and 37% return on equity, placing it at the top of its peer group on both margin and capital efficiency metrics with a Piotroski F-Score of 7/9. Peer-rank breakdown | Net margin stays above 18% and return on equity stays above 25% for at least 3 of the next 4 quarters, confirming margin durability. | →Stable |
| CounterRevenue growth has been decelerating, and a Rule of 40 score of only 22 suggests the growth-plus-margin combined metric is weaker than the margin headline implies. | ||
Paycom has reached its analyst consensus price target, leaving only 1.2% upside at current prices, which signals the position is effectively fully valued and no new entry is warranted until price or targets reset. Warnings | Analyst consensus price target rises above $150 within 6 months to restore meaningful upside and justify fresh capital commitment. | ↓Deteriorating |
| CounterAnalysts could lower targets rather than raise them if revenue growth continues to decelerate below market expectations. | ||
Despite the stock trading below its 200-day moving average with an 8% monthly slope decline, on-balance volume is rising, indicating that institutional buyers are accumulating at depressed prices. Momentum breakdown | Price recovers above the 200-day moving average within 9 months as the accumulation translates into price appreciation. | ↑Improving |
| CounterThe death cross with an 8% monthly decline rate is one of the sharpest confirmed downtrends in the dataset; accumulation divergences often fail to resolve quickly in this pattern. | ||
Paycom sustains a dividend with 111% coverage, demonstrating that cash generation is sufficient to fund shareholder returns even as the company invests in growth.
↑ImprovingCatalyst breakdown
- Expectation
- Dividend payout is maintained or raised over the next 4 quarters without a cut, confirming the cash generation floor.
CounterWith only 63% free cash flow relative to net income and a Rule of 40 score of 22, the underlying cash quality is weaker than the headline dividend coverage suggests.
Paycom generates a 22% net margin and 37% return on equity, placing it at the top of its peer group on both margin and capital efficiency metrics with a Piotroski F-Score of 7/9.
→StablePeer-rank breakdown
- Expectation
- Net margin stays above 18% and return on equity stays above 25% for at least 3 of the next 4 quarters, confirming margin durability.
CounterRevenue growth has been decelerating, and a Rule of 40 score of only 22 suggests the growth-plus-margin combined metric is weaker than the margin headline implies.
Paycom has reached its analyst consensus price target, leaving only 1.2% upside at current prices, which signals the position is effectively fully valued and no new entry is warranted until price or targets reset.
↓DeterioratingWarnings
- Expectation
- Analyst consensus price target rises above $150 within 6 months to restore meaningful upside and justify fresh capital commitment.
CounterAnalysts could lower targets rather than raise them if revenue growth continues to decelerate below market expectations.
Despite the stock trading below its 200-day moving average with an 8% monthly slope decline, on-balance volume is rising, indicating that institutional buyers are accumulating at depressed prices.
↑ImprovingMomentum breakdown
- Expectation
- Price recovers above the 200-day moving average within 9 months as the accumulation translates into price appreciation.
CounterThe death cross with an 8% monthly decline rate is one of the sharpest confirmed downtrends in the dataset; accumulation divergences often fail to resolve quickly in this pattern.
Per-dimension breakdown
Quality
7.7/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 5.9 |
| Gross margin | 10.0 |
| Op margin | 10.0 |
| Net margin | 10.0 |
| Current ratio | 4.2 |
| FCF quality | 6.3 |
| Moat | 6.9 |
| Rule of 40 | 5.5 |
| Piotroski F | 7.8 |
- ▸Excellent ROE: 41%
- ▸Strong margins: 23%
- ▸Strong Piotroski F-Score: 7/9
- ▸High-quality business
Growth
7.5/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.0 |
| EPS growth | 10.0 |
Momentum
5.5/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 0.0 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 3.1 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
4.7/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 4.4 |
| Analyst rating | 5.0 |
| Price target | 4.6 |
Insider
3.4/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 2.1 |
| notable moves | 3.0 |
- ▸Insider selling (low materiality) — $670,163 (0.006% of mkt cap)
- ▸Institutions reducing
Peer rank
4.4/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 4.6 |
| quality rank | 8.4 |
| growth rank | 3.4 |
- ▸Superior ROE vs peers
- ▸Best-in-class margins
Technical
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 4.7 |
| support resistance | 3.5 |
| 52w position | 8.8 |
| gap | 7.5 |
- ▸Extreme gap down (-7.9%) - potential reversal
Risk (lower is worse)
4.5/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 6.8 |
| days to cover | 7.1 |
| volatility | 2.1 |
| put call | 1.8 |
| implied vol | 4.2 |
| max pain risk | 3.0 |
| beta | 8.6 |
| debt equity | 3.6 |
| news risk | 3.0 |
- ▸Elevated put/call: 1.73
- ▸Above max pain $65
Catalyst
7.7/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| surprise avg | 7.8 |
| dividend safety | 7.5 |
| news activity | 8.0 |
- ▸Strong earnings: 3B/0M
- ▸Dividend aristocrat: 0.6% yield
How the verdict was assembled
Engine trigger
Downgraded from BUY WAIT — price $258.80 vs the analyst target $227.06: -12.3% upside; No upside left.
Engine technical detail
verdict_path:
L4:PATH_C2_GARP|V8:TARGET_REACHED|SANITY:BUY+upside<=0Passed (6)
- MOMENTUM:5.5>=5.5
- INSIDER:OK
- NEWS_BOOST:ANALYST:0.60
- EARNINGS_PROXIMITY:NO_DATE
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-1.0=NEGATIVE
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
-1.04
Upside
-12.3%
Downside
11.8%
Sizing output
AVOID
SetupRange Bound — RSI 56 mid-range, Bollinger mid-band
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The C-path quality+growth combination triggered the HOLD_IF_HOLDING verdict: quality 7.7 and growth 7.5 both clear their thresholds, with asymmetric R:R of -1.04 supporting the read.
The strongest dimensions are Quality at 7.7, Catalyst at 7.7, and Growth at 7.5; the weakest are Insider at 3.4, Peer rank at 4.4, and Risk (lower is worse) at 4.5. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of -1.04 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Best In Class Margins Roe
Trip ifNet margin falls below 15% for 2 consecutive quarters, signaling margin compression below the peer-leader threshold.
- P2Target Exhaustion Watch
Trip ifAnalyst consensus price target falls below $125, reducing already-thin upside to less than 7% from current levels.
- P3Volume Accumulation Vs Downtrend
Trip ifOn-balance volume declines for more than 3 consecutive months while price remains below the 200-day moving average.
- P4Dividend Sustainability Signal
Trip ifDividend per share decreases by more than 15% in any single quarter, breaking the income support thesis.