Paycom (NYSE:PAYC) is a software-as-a-service provider that specializes in HCM. Not up on the hip acronyms? The company provides software and cloud-based applications online. And it focuses on the relatively new sector that businesses term “human capital management.”
Back in the day, HCM was more or less human resources. But now, as the workplace has become digitized — especially for enterprise-level and larger firms — it has all been bunched together as HCM.
Paycom provides a service that is built to help provide all the resources a company needs to manage its human capital — from recruitment to retirement. And if you’ve ever worked for a big company, you can understand why this is so attractive. It’s a business model with deep penetration and high barriers to competition. In short, it’s an attractive play for my Growth Investor model portfolio.
The Future of Human Resources
Generally, big organizations have different systems that operate within divisions, and then those divisions need to communicate and interact with each other. That means layers of permissions and access protocols. Even within a division, like HR for example, there may be various providers for payroll, benefits, onboarding, recruitment and 401ks. And all this software is being updated at various times. And backed up.
The more systems you have running, the more complicated it is.
That’s why the new generation of platforms look at the challenges more holistically. And that’s what PAYC stock is all about.
Paycom started as one of the first fully online payroll companies in the United States. And since then, it has expanded to build out its suite of HR solutions. What’s more, PAYC also works its solutions across numerous industries; it isn’t focused on just one or two sectors. That helps broaden its ability to grow, since not all sectors grow at the same time.
The company’s popularity continues to grow. Since its IPO in 2014, PAYC stock is up over 1,200%, or more than 240% a year. That makes its current year-to-date performance of nearly 80% look tame by comparison. I’m expecting more, given the strong fundamentals identified by my Portfolio Grader tool, so it earns a spot among my High-Growth Investments at Growth Investor.
But the stock is off about 10% since mid-September, so this is a good opportunity to get in. It actually lost nearly 20% but has regained about half those losses already.
Bottom Line on PAYC Stock
Because Paycom is growing so fast, you could expect PAYC stock to have a triple-digit price-to-earnings ratio. But you’d be wrong. Its trailing P/E is currently around 83, which isn’t cheap, but it’s in line with the company’s growth.
October holds a lot of volatility historically, and right now, there’s more optimism shining through. The U.S.-China trade war may be softening and Brexit may end less negatively than expected. This will boost business confidence, and in turn, the fortunes of PAYC.
Plus, there is always talk that some big tech player may step in and acquire the company, likely at a premium to its premium.
All this gives you an idea of why my Portfolio Grader continues to rate PAYC stock an “A.” And I’ve got more where that came from. There’s a bigger, deeper tech trend going on that I’m even more excited about.
“The Mother of All Technologies”
Any company that’s involved in software-as-a-service — or dealing in massive amounts of data more generally — will need “the mother of all technologies.”
Up until now, technologies have certainly made our lives easier and more efficient … but with a lot of room for human error. People trip over cords, spill their coffee and get tired.
Artificial intelligence does not.
If that sounds futuristic, well then, the future is already here. If you use apps like Netflix (NASDAQ:NFLX), TurboTax, QuickBooks, Zillow (NASDAQ:Z) or even an email spam filter, then AI is already helping your day run more smoothly. And as scientists find even more applications for artificial intelligence — from healthcare to retail to self-driving cars — it’s incredible to imagine how much data will be involved.
To create AI programs in the first place, tech companies must collect vast amounts of data on human decisions. Data is what powers every AI system.
So any one company that can help with customers’ data issues is the one company that’s most worth investing in.
You don’t need to be an expert to take part. I’ll tell you everything you need to know, as well as my “buy” recommendation, in Growth Investor. My #1 stock for the AI trend is still under my buy limit price — so you’ll want to sign up now. Get in while its still cheap.
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Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.