Price to Operating Profit (P/OP)
since 2014
Calculation
Paycom Software Inc., P/OP, long-term trends, calculation
| P/OP | = | Share price1, 2, 3 | ÷ | Operating profit per share1 | Operating profit per share1 | = | Operating income1 (in thousands) |
÷ | No. shares of common stock outstanding2 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Feb 16, 2023 | 46.99 | = | 307.45 | ÷ | 6.54 | 6.54 | = | 378,679 | ÷ | 57,871,962 | |
| Feb 17, 2022 | 74.98 | = | 327.72 | ÷ | 4.37 | 4.37 | = | 253,567 | ÷ | 58,014,548 | |
| Feb 18, 2021 | 124.57 | = | 401.55 | ÷ | 3.22 | 3.22 | = | 186,123 | ÷ | 57,739,986 | |
| Feb 13, 2020 | 77.30 | = | 303.29 | ÷ | 3.92 | 3.92 | = | 226,224 | ÷ | 57,661,188 | |
| Feb 14, 2019 | 58.82 | = | 178.38 | ÷ | 3.03 | 3.03 | = | 173,715 | ÷ | 57,276,992 | |
| Feb 14, 2018 | 67.69 | = | 92.08 | ÷ | 1.36 | 1.36 | = | 78,625 | ÷ | 57,801,299 | |
| Feb 21, 2017 | 52.54 | = | 53.11 | ÷ | 1.01 | 1.01 | = | 57,971 | ÷ | 57,346,334 | |
| Feb 22, 2016 | 48.57 | = | 29.27 | ÷ | 0.60 | 0.60 | = | 34,435 | ÷ | 57,135,187 | |
| Feb 26, 2015 | 112.64 | = | 32.84 | ÷ | 0.29 | 0.29 | = | 15,700 | ÷ | 53,848,094 |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 US$
2 Data adjusted for splits and stock dividends.
3 Closing price as at the filing date of Paycom Software Inc. Annual Report.
The analyzed period reveals a divergence between the consistent growth of operating profitability and the volatility of market valuation. While operational performance improved steadily over the nine-year span, the Price to Operating Profit (P/OP) ratio underwent significant fluctuations, reflecting varying levels of market optimism and subsequent valuation corrections.
- Operating Profitability Trends
- Operating profit per share demonstrated an uninterrupted upward trajectory, rising from 0.29 US$ in 2015 to 6.54 US$ by 2023. This consistent growth indicates a strong expansion in operational efficiency and earnings power over the period.
- Share Price Movement
- The share price experienced aggressive growth between 2015 and 2021, ascending from 32.84 US$ to a peak of 401.55 US$. Following this peak, a corrective phase occurred, with the price declining to 307.45 US$ by February 2023.
- P/OP Ratio Interpretation
- The P/OP ratio exhibited high volatility, beginning at an elevated 112.64 in 2015 before normalizing between 48.57 and 77.30 from 2016 to 2020. A significant valuation spike occurred in 2021, reaching 124.57, which represents the highest valuation multiple relative to operating profit in the series. This was followed by a sharp contraction, with the ratio falling to 46.99 in 2023, the lowest point recorded since 2016.
- Correlation Analysis
- The data indicates that the peak in the P/OP ratio in 2021 was driven by share price growth that far outpaced the growth of operating profit. Conversely, the reduction in the ratio by 2023 was the result of a declining share price coinciding with the company's highest ever operating profit per share, suggesting a significant compression in the valuation multiple.
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