PAYC – Market expectations are for Uniform ROA to expand, but management may have concerns about growth opportunities, client retention, and productivity
March 17, 2022
- Paycom Software (PAYC) currently trades above corporate and historical averages relative to Uniform earnings, with a 48.9x Uniform P/E (Fwd. V/E’).
- At these levels, markets are pricing in expectations for Uniform ROA to expand to 40%, accompanied by 12% Uniform asset growth.
- Meanwhile, analysts expect Uniform ROA to slightly improve to 26% in 2023, accompanied by 17% Uniform asset growth.
- If sustained going forward, these levels would imply a stock price closer to $236, representing approximately 22% equity downside for the firm.
- Moreover, the firm’s most recent earnings call suggests management may have concerns about growth opportunities, client retention, and productivity.
