This software-as-a-service stock has seen a dramatic shift from being a darling on Wall Street to a struggling name in the software sector. Still, the company shows solid growth and remains quite profitable.
Paycom Software (payment 4.36%) Once, it was viewed as a software investment you could purchase, set aside, and return to in five years.
However, that sense of stability has been disrupted. The stock price has plummeted roughly 72% since its peak in November 2021. Such a steep decline likely unsettled investors, prompting many to sell their shares.
But this raises an intriguing question: Is this merely a failure narrative, or are high-quality companies undergoing a valuation reassessment? And could this actually represent a buying opportunity?
Reset rating
Paycom offers payroll and human resources software, relying heavily on recurring revenue streams. Typically, one wouldn’t expect to see a company like this have its stock price halved, only to see it cut further.
Yet, the lofty stock valuations of 2021 set an exceedingly high bar.
When investors anticipate years of steady, significant growth from a software company, any hint of a slowdown can lead to a complete reevaluation of whether the stock merits its elevated price.
Ultimately, Paycom’s slowing growth has resulted in a much-needed valuation reset.
To clarify, the business is thriving, although not at the robust levels it did in 2021. For instance, Q3 2025 revenue grew by 9.1% year-over-year to $493.3 million, a stark drop from the 30.4% growth recorded in Q3 2021.
This downturn in growth naturally contributes to the decline in its stock price since 2021—it’s a notable slowdown.
Adding to the weight on the stock, even the Q3 earnings reflect a sequential slowdown, with revenue growth at 9.1% down from 10.5% in the previous quarter.
Profitability remains strong
Still, there’s plenty to appreciate here.
For starters, a 9.1% growth rate in the third quarter is decent. Plus, the recurring revenue growth continues in the double digits. Paycom’s “recurring and other” revenue rose by 10.6% year-over-year, making up about 95% of its overall revenue—seeing this crucial aspect growing at double-digit rates is definitely a positive sign.
Moreover, the company is exhibiting strong profitability trends. The adjusted EBITDA margin improved from 37.9% to 39.4% in Q3 2025 compared to the same period the previous year. Additionally, its non-GAAP earnings per share for the third quarter increased an impressive 16.2% year-over-year to $1.94.
Today’s changes
(-4.36%) $-6.94
current price
$152.42
Key data points
Market capitalization
$8.6 billion
daily range
$151.86 – $159.85
52 week range
$151.84 – $267.76
volume
49K
average volume
745K
gross profit
74.05%
dividend yield
0.98%
Furthermore, the company’s robust profitability aligns well with a more conservative recent valuation. Paycom is generating additional income through stock buybacks, having repurchased $223.4 million in stock in the third quarter of 2025.
To highlight the significance of these repurchases, if Paycom keeps this pace for the next three quarters, its share count could fall by about 10%. That’s, of course, contingent on being able to buy back shares at current prices.
Overall, I think this is an excellent time to consider buying this stock. With a forward P/E of just 15, double-digit recurring revenue growth, an expanding adjusted EBITDA margin, and no debt on its balance sheet, Paycom stock seems like a solid choice today.
That said, there are risks involved. If growth falters further, investors might begin questioning the company’s growth tactics and potentially push valuations down even more. Plus, the online payroll and human capital management sector is fiercely competitive. Slower growth might suggest that Paycom is losing its edge. Still, I feel the current conservative valuation already accounts for these risks.
