Quality Investing with René Sellmann

Quality Investing with René Sellmann

Share this post

Quality Investing with René Sellmann
Quality Investing with René Sellmann
Paycom’s Business Model & the Factors Behind Paycom’s Historic Stock Decline
Copy link
Facebook
Email
Notes
More
Stock Writeups

Paycom’s Business Model & the Factors Behind Paycom’s Historic Stock Decline

My First Substack Post!

Rene's avatar
Rene
Jul 10, 2024
∙ Paid
3

Share this post

Quality Investing with René Sellmann
Quality Investing with René Sellmann
Paycom’s Business Model & the Factors Behind Paycom’s Historic Stock Decline
Copy link
Facebook
Email
Notes
More
4
Share

Paycom Software $PAYC used to be a high-flying tech darling and saw its share price soar past $500 in 2021, a 3,571% gain from its debut price of $14 per share in 2014.

Today, Paycom’s stock is down some 74% from that peak and now trading in the $140 range.

In this post, I’ll explore a) the stock & business performance of Paycom, b) the factors behind Paycom’s stock decline, and c) Paycom’s business model.

Chapter 1: Paycom’s Stock Performance

Paycom’s more recent stock performance was truly abysmal!

  • The stock is down 30% year-to-date

  • The stock is down 55% over the last twelve months

  • And finally, Paycom’s stock suffered a remarkable decline of 74% from its 2021 peak.

However, longer term, the stock compounded at a rate of 27% annually (!) despite the recent selloff and 10x-ed investors’ money, massively outperforming common indices.

Chapter 2: Business Performance

If you compare the recent stock performance with the fundamental business development, things start looking interesting! Here are some of the highlights:

The number of customers is growing:

Gross margins well above 80%:

Revenue grew from 76M in 2012 to 1.7B today which represents a compounded annual growth of 33%:

As the operating profit margin expanded from 8% (that’s $6M on a $76M revenue), to 33% in 2023, representing more than $500M and almost $600M in EBIT over the last twelve months. Hence, operating profit grew at an even faster rate than revenue! A CAGR of more than 50% ...

Based on the numbers above, it should come as no surprise that Paycom earned a very good return on its internal investments: between 20% and 30% in most years.

As of today, Paycom pays out 18.4% of its profits as a dividend, giving investors a dividend yield of 1%.

This post is for paid subscribers

Already a paid subscriber? Sign in
© 2025 René Sellmann
Market data by Intrinio
Privacy ∙ Terms ∙ Collection notice
Start writingGet the app
Substack is the home for great culture

Share

Copy link
Facebook
Email
Notes
More