Paycom Delivers Strong Fiscal 2021 Results and Is Well Positioned for Future Growth; FVE Up 3%

Paycom delivered robust fiscal 2021 results underpinned by a bounceback in labor markets, strong sales execution following an extensive marketing campaign, and record revenue retention. Top-line growth was aided by a continued shift upmarket to larger clients and by taking greater share of wallet through higher module uptake. Paycom continued to invest for growth through research and development expenditure and hiring service personnel, which limited operating margin expansion over the period. But the company’s results were in line with our expectations, and our medium-term forecasts are broadly unchanged. We marginally lift our fair value estimate by 3% to $388 per share due to time value of money. Despite shares rallying after the result, Paycom screens as undervalued relative to our updated valuation.