Paycom Is on Track to Report Healthy Fiscal 2022 Growth Despite Economic Headwinds

Narrow-moat Paycom enjoyed continued momentum in the second quarter of fiscal 2022, with a combination of strong sales execution and a further skew upmarket driving a robust 31% year-on-year increase in revenue. Paycom’s employee self-service centric offering continues to attract new clients, and greater module uptake has supported higher revenue per client and year-on-year adjusted EBITDA margin expansion of 180 basis points during the quarter. While labor markets have remained resilient to date, we have adjusted our macroeconomic forecasts to factor in a near-term slowdown before a recovery in 2024. However, the minor dilutive impact of this update is offset by time value of money, and we maintain our $388 fair value estimate. At current prices, shares trade at an attractive 8% discount to our valuation.