Credit Suisse Initiates Coverage On Paycom: Current Valuation 'Does Not Reflect Growth'

Paycom Software Inc PAYC is poised to benefit from the increasing use of technology-driven employee benefit consumption, according to Credit Suisse.

The Paycom Software Analyst: Kevin McVeigh initiated coverage of Paycom Software with an Outperform rating and a price target of $425.

The Paycom Software Thesis: The company caters to the global Human Capital Management market with a total addressable market of around $150 billion, McVeigh said in the initiation note.

Shares are down around 35% to 45% from recent highs and seem to be “discounting too much recession fear,” the analyst mentioned. The current valuation “does not reflect the growth + margin prospects of the business and is only due to the significant geopolitical and macro uncertainty,” he added.

“We appreciate PAYC’s best-in-class margins amid notable large and growth TAM, as evidenced by it realizing (by our estimate) only $15 per employee per month (PEPM) vs. its target of $50+ PEPM, up from ~$35 at its IPO,” McVeigh further said.

PAYC Price Action: Shares of Paycom Software had declined by 1.84% to $350.67 at the time of publication Wednesday.