Buffett Brain · Research note
Score updated 26 Sept 2026 · analysis from 25 May 2026
PAYC· Technology
Paycom Software
Paycom Software boasts strong margins and growth, but valuation and management quality raise concerns.
Buffett fit
Partial fit
Owner
88
Durability
95
Management
35
Price
31
Score updated 26 Sept 2026 · analysis from 25 May 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Technology stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
If I owned Paycom, I'd appreciate the consistent revenue growth of 18.1% CAGR over the last five years.
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The business has shown resilience, profitable in all of the last five years, with a maximum EPS decline of only 8.96%.
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Management has reduced the share count by 0.91% over five years, which is a positive sign, but the yield of 2.37% is modest.
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With an yield of 5.4% and a of 15.1, the valuation does not provide a strong compared to Buffett's target of 8-10%.
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
5- 1 of 21.5% exceeds the sector top-quintile cutoff of 10.7%, indicating strong capital efficiency.
- 2 of 79.7% is well above the sector's top-quintile margin of 72.4%.
- 3 of 28.3% is significantly higher than the sector's top-quintile margin of 14.0%.
- 4Revenue CAGR of 18.08% demonstrates strong growth potential.
Concerns
5- 1Management quality score of 35 suggests potential issues in strategic decision-making.
- 2 yield of only 5.4% does not meet Buffett's preference for 8-10%.
- 3 of 15.1 is above the comfort zone for valuation, indicating possible overvaluation.
- 4 yield of 2.37% is relatively low, showing limited shareholder return focus.
Price history
$273-50.2%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
Paycom Software provides a cloud-based HCM solution for small to mid-sized companies, generating $2.05B in TTM revenue. Their software covers recruitment to retirement, driving strong demand. The unit economics appear solid, with a of 79.7%.
What other investors would say
The same company, judged by three other documented playbooks.
Keep researching
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