Paycom Earnings: Laser Focus on Payroll Automation Continues To Attract Clients; Shares Look Cheap

We maintain our $388 fair value estimate for narrow-moat Paycom following a strong start to fiscal 2023. The firm posted another impressive quarter with new client wins, greater module attachment, and a continued shift upmarket driving revenue growth of 28% year on year. Paycom continues to benefit from a greater contribution from ultra-high margin interest income revenue, however, this was offset by elevated investment in product innovation and marketing to attract new clients and support global expansion, resulting in broadly flat operating margins year on year.