Paycom Software (PAYC) In A Perilous Reversal

Trade-Ideas LLC identified Paycom Software (PAYC) as a "perilous reversal" (up big yesterday but down big today) candidate
By TheStreet Wire ,

Trade-Ideas LLC identified

Paycom Software

(

PAYC

) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Paycom Software as such a stock due to the following factors:

  • PAYC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $50.5 million.
  • PAYC has traded 390,015 shares today.
  • PAYC is down 3.4% today.
  • PAYC was up 16.8% yesterday.

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More details on PAYC:

Paycom Software, Inc. offers cloud-based human capital management (HCM) software solutions delivered as Software-as-a-Service in the United States. It provides functionality and data analytics that businesses need to manage the complete employment life cycle from recruitment to retirement. PAYC has a PE ratio of 126. Currently there are 5 analysts that rate Paycom Software a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Paycom Software has been 720,200 shares per day over the past 30 days. Paycom Software has a market cap of $2.2 billion and is part of the technology sector and computer software & services industry. Shares are up 73.7% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Paycom Software as a

hold

. The company's strengths can be seen in multiple areas, such as its notable return on equity, robust revenue growth and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock itself is trading at a premium valuation.

Highlights from the ratings report include:

  • Compared to other companies in the Software industry and the overall market, PAYCOM SOFTWARE INC's return on equity exceeds that of both the industry average and the S&P 500.
  • PAYC's very impressive revenue growth greatly exceeded the industry average of 17.5%. Since the same quarter one year prior, revenues leaped by 51.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Powered by its strong earnings growth of 40.00% and other important driving factors, this stock has surged by 121.43% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • Although PAYC's debt-to-equity ratio of 0.28 is very low, it is currently higher than that of the industry average. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.08 is very weak and demonstrates a lack of ability to pay short-term obligations.

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