PAYC

Paycom is a high-quality, founder-led payroll and human-capital-management SaaS business with exceptional unit economics — an 83.2% gross margin, 27.6% operating margin, 22.1% net margin and a 26.2% return on equity. Revenue grew 8.9% to $2.05B in FY2025, continuing a strong multi-year compounding record (from $1.06B in FY2021). The standout feature is the valuation: at 15.5x EPS of $8.08 and 3.3x sales, Paycom trades far below typical SaaS multiples for a business of this profitability.

The one blemish is a profit dip: net income fell 9.7% to $453M and operating income 10.6%, as the company ramped R&D 16.8% to $283M and capex 40.4% to $271M to build out its automation products (Beti, GONE) and AI capabilities — investments that also short-term cannibalize some service revenue. Importantly, cash generation moved the other way: operating cash flow grew 27.2% to $679M, and the company bought back $326M of stock (up 165.1%, cutting shares 5.2%) plus paid $84.8M in dividends. The balance sheet is effectively debt-free (only $29M long-term debt); the optically high 3.39x liabilities/equity is driven by client payroll funds held in transit (current assets and liabilities both ~$5.4B), not real leverage.