Paycom Stock: The BIGGEST Opportunity in 2024?

Paycom Stock: The Greatest Opportunity in 2024? Paycom Software, trading on the NYSE under the ticker symbol PAYC, used to be a high-flying tech darling and saw its share price soar past $500 in 2021, a 3,571% gain from Paycom's debut price of $14 per share in 2014. Today, however, the stock of Paycom is down 73% from that peak and now trading in the $140 range.
Today, we are going to explore the factors behind Paycom’s stock decline and discuss whether Paycom's poor stock performance can represent a good opportunity for quality-focused long-term investors.
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[@themusketeer86]

Good intro to the business, thanks. It’d be great if you could please do a more in-depth valuation next time. Also, please address the major concerns around their high stock based compensation and significant insider selling (especially by the CEO). Thanks

[@krakhour2]

UTG just came out with its own BETI. So they do have competition.

[@krakhour2]

Ultipro

[@alexlimion2624]

thanks for making this, i've been recently looking into PAYC since it has such a great return record , leadership and strong financial position.

Any insights I did not cover?

[@alexlimion2624]

Your video was great, balancing accessibility and detail. Perhaps more details on the competitive landscape? I understand that for same services ADP customers pay over 2x those at PAYC.

[@colinobrien1895]

First video I watched of yours good content, I subbed appreciate your work look forward to future videos

Welcome aboard!

[@marcoformica861]

fantastic video, these are all my conclusions, but it's nice to hear it confirmed by others too

Glad to hear it! And thanks for commenting Marco.

[@danguee1]

4:46 Paycom may have guided to 10-12% revenue growth over 2024. But, if the trajectory of the graph at 4:20 is anything to go by, that guidance suggest we need to believe there's going to be an instant and abrupt end to that alarming downward trajectory - which is optimistic imo unless Paycom actually *_know_* something we don't....

[@ominollo]

Hi René, Thanks for your video. It looks interesting but I have remark: what is their current market share? I think this is an important point when analyzing a new company/new sector 🤔

Yes, correct. I have a nice pie chart I will share in a next video. It depends on how you look at it, but the market is very fragmented and should be

[@ominollo]

Many competitors, I wonder how they compare to this one in terms of recurring revenues, management ownership and product portfolios 🤔 I look forward to your next video!

[@JuanBattaglia45]

It's in my watchlist too. 13% Insider Ownership & Bill Nygren inside. I need more compression (that's how I sleep comfortably). I am closer to Walter Schloss than toTerry Smith (valuation preference).

Thanks for sharing Juan!

[@JuanBattaglia45]

:)

[@louisking11]

ADP is the winner here

Can you share why you think so? It’s not a winner takes all market, so does it matter?

[@foodguy3435]

ADP is the OG when it comes to payroll. At least here in the us. I find their user interface is the simplest to use. I find Workday user interface is much more difficult to navigate. However, I have never used Paycom. Or even Paychex.

[@Allen-L-Canada]

Its main moat is switching cost, but most competitors have a switching cost moat too, using SaaS. So how do we know that PAYC's SC moat is stronger than the competitors?

They grew their market share for many years. I guess that’s one indicator of it?

[@Allen-L-Canada]

Good point.

[@Allen-L-Canada]

But it's small company, especially many years back. So the growth is relatively easy, as it scale up, if without a strong moat, the growth will be harder and harder.

@@Allen-L-Canada That's correct.

[@sheanathan3566]

Thanks for sharing your analysis I would be curious what percentage of the market they currently have and how saturated the market is for these kinds of services The big elephant in the room is if we have a recession. Companies like Paycom and their model will get hit hard

I‘ll address this in another video soon.

[@nicholascroll8954]

This is my understanding. The use of BETI for new Paycom customers is mandatory. BETI involves a change to how payroll has traditionally been administered and change can be very hard to bring about to an organisation. The use of BETI for existing customers is optional. So there is a greater hurdle to obtain new customers than previously. The one system that you do not want to mess with from an employee perspective is the payroll system. So the case for BETI needs to be very very compelling. I assume implementing it would lead to job losses within HR. Presumably HR are heavily involved in deciding if it should be chosen.

Thanks. The last point is interesting. Show me the incentives …

[@nicholascroll8954]

There is an audio recording of an internal meeting at Paycom in which the CEO is urgently discussing the need to 'fix' the product and in parallel change the staff mindset to an agile mindset quickly. I think the audio was posted on KZbin because the CEO was effectively saying if you don't like it then you should leave the company. This sounded more like a company in crisis rather than a company with a leading product enchancement (BETI). Customer retention rate will be a KPI for investing in this company. I will sit on the sidelines for now.

@@nicholascroll8954 Yeah I saw this video. I kind of like the management switching to "full focus mode" though even though it shows there's a lot of work to be done.

[@derrickcummings3568]

I was encouraged by the video as an investor and would feel the same way if I was a customer too.

[@OliSGM]

Workday does all of this and more. Paycom are definitely not a first mover in this. Why would a customer choose Paycom?

I will have to do more research on Workday's offering here. Thanks for bringing this up.

[@OliSGM]

Another thing to pay attention to is why they are spending half of their operating cash flow on building, operating and maintaining data centres vs using cloud providers. Yes they have nice gross margins because of it but their FCF margins are not nice. The total cost of building, operating, maintaining, hiring networking staff, cyber security will be higher than using cloud providers for sure.

@@OliSGM Thanks. I literally bookmarked two tweets focused on this today.

[@amandahaataia5505]

Ideal customer profile. Workday serves the enterprise better. Paycom serves your mid-market better. Workday can easily have a 6 month to year install and require its own FTE to maintain. Paycom can implement in 6-14 weeks and can work with a smaller user base. I don’t believe a company with 300 employees or less for the most part could justify workday’s spend

[@simongrahn8179]

how does payc compare to adp?

In what sense?

[@Allen-L-Canada]

will PAYC be able to steal market from ADP?

[@xyz9250]

No comparison

[@amandahaataia5505]

@@Allen-L-Canadayes. ADP’s customer service is suffering. They have the largest market share but people do jump ship from them

[@amandahaataia5505]

@@Allen-L-Canadayes. They cover similar markets, but currently ADP has a larger market share

[@ddddd75455]

One red flag I see for this company is that the software that they offer is terrible. Is totally outdated as a user expierence, hard to use and not updated of today's requirments. There is a meeting from CEO in youtube that they discuss this topic. And looks like they are quite lost on the product area. They don't even work in agile methodologies. I hope they can uplift they services and make it more easy to use. If not no way to get new customers or retain existing ones

Have you used Beti?

[@Tobi67890]

Which companies have the best software?

[@Pizza-gb1ch]

@17:46 Highlight in a FUTURE video?! 😕 U are saving the risks for later? 💁

[@Pizza-gb1ch]

I'm bullish on PAYC but have concerns about FCF too.

Didn‘t want to make the video even longer. No one should buy stocks based on random KZbin videos anyway and do their own due diligence. I‘ve identified five key risks. More soon.

[@germanoller4418]

The numbers are perfect, so Quantitative analysis is good. The problem is Qualitative, they are a software company with and old product, and the CEO seems to be an idiot with Napoleon syndrome who refuses to improve their software, wich for a Packaged Software copmany is clearly not ok.

Thanks for your perspective. Have you used their products yourself? In what way can their solution be considered old?

[@amandahaataia5505]

I’m surprised you find their product old. Their benefit value is a single database so they focus on a tightly embedded HRIS and payroll system designed to save time

@@amandahaataia5505 Thanks for sharing your experience

[@derrickcummings3568]

Considering there is a viral video of the ceo complaining about the software and how quickly they need to fix it… I would say you don’t know what you are talking about

@@derrickcummings3568 I'm well aware of this video

[@andreamantovani5354]

Cannot get over how bad the CEO is and how toxic the company culture is

Is this a comment made based on your experience as an employee?

[@andreamantovani5354]

I onow so many people who have worked there and reported HORRIBLE things

@@andreamantovani5354 for example?

[@xyz9250]

Not sure about the stock, as a product Paycom sucks. Can’t believe a company has been in business for 20 years but only has a alpha product, beta at the best.

Are you a user?

[@xyz9250]

Yes. I use the modules for employee and manager.

What do you think of Paycom's stock?