Analysis of Solvency Ratios
Quarterly Data
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
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- Income Statement
- Balance Sheet: Assets
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Operating Profit Margin since 2014
- Return on Assets (ROA) since 2014
- Total Asset Turnover since 2014
- Price to Book Value (P/BV) since 2014
- Aggregate Accruals
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Solvency Ratios (Summary)
Paycom Software Inc., solvency ratios (quarterly data)
Based on: 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
The analysis of the financial ratios over the given periods reveals several noteworthy trends in the company's financial structure and performance.
- Debt to Equity Ratio
- The debt to equity ratio exhibited a steady decline from 0.09 in March 2019 to 0.02 by September 2023. This gradual reduction indicates a consistent decrease in the company’s reliance on debt financing relative to equity, suggesting a strengthening equity base or reduced leverage over the period.
- Debt to Capital Ratio
- Similarly, the debt to capital ratio followed a declining trend, moving from 0.08 in the first quarter of 2019 to 0.02 in the most recent period. This trend aligns with the debt to equity ratio, reflecting a lower proportion of debt in the company’s overall capital structure over time.
- Debt to Assets Ratio
- The debt to assets ratio remained consistently low throughout the periods, fluctuating marginally around 0.01 to 0.02. This suggests that debt constitutes a small fraction of total assets, indicating a conservative approach to debt usage or a robust asset base.
- Financial Leverage
- The financial leverage ratio demonstrated significant variability, with values ranging from 2.71 to 5.4. Notable peaks occurred intermittently, such as in March 2019 and March 2022, while the later periods indicate lower leverage ratios closer to the 2.7 to 3.3 range. These fluctuations imply changes in the capital structure or equity levels, indicating varying degrees of risk exposure over time.
- Interest Coverage Ratio
- The interest coverage ratio showed considerable volatility, with extremely high values peaking above 64,000 in March 2021, followed by missing data in several subsequent quarters and a resumption at lower yet still robust levels around 130 to over 1,300 in recent periods. This ratio’s high values suggest very strong earnings relative to interest obligations, reflecting minimal reliance on debt and strong operational profitability. The missing data should be noted as a limitation in analyzing continuity.
Overall, the data indicates a trend towards reduced financial leverage and debt dependence, with strong capabilities to cover interest expenses. The company appears to maintain a conservative financial profile with robust earnings relative to its debt obligations over the timeline assessed.
Debt Ratios
Coverage Ratios
Debt to Equity
Paycom Software Inc., debt to equity calculation (quarterly data)
Based on: 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q3 2023 Calculation
Debt to equity = Total debt ÷ Stockholders’ equity
= ÷ =
The financial data reveals a consistent downward trend in total debt over the observed periods, decreasing steadily from approximately $33,954 thousand in the first quarter of 2019 to a stable level of $29,000 thousand from the second quarter of 2022 onwards. This indicates a deliberate effort to reduce leverage or maintain a low level of borrowing relative to earlier periods.
In contrast, stockholders' equity demonstrated a pronounced upward trajectory throughout the period under review. Beginning around $398,553 thousand in the first quarter of 2019, equity increased significantly, reaching over $1,421,309 thousand by the third quarter of 2023. This growth suggests strong retained earnings, capital raising activities, or overall appreciation in the company's value to shareholders.
The interplay between debt and equity is reflected in the debt to equity ratio, which consistently declined over time. Starting at 0.09 in early 2019, this ratio steadily decreased, reaching a low of 0.02 by mid-2022 and maintaining this level thereafter. This diminishing ratio underscores the company's transition towards a more conservative capital structure, favoring equity financing over debt.
Overall, the data portrays a firm strengthening its financial position by reducing reliance on debt while substantially increasing equity, thereby improving solvency and reducing financial risk over the six-year span.
- Total Debt
- Decreased steadily from $33,954 thousand to $29,000 thousand, stabilizing in 2022.
- Stockholders’ Equity
- Increased significantly from $398,553 thousand to $1,421,309 thousand, indicating robust growth in shareholder value.
- Debt to Equity Ratio
- Declined from 0.09 to 0.02, reflecting a move toward lower financial leverage and enhanced capital structure strength.
Debt to Capital
Paycom Software Inc., debt to capital calculation (quarterly data)
Based on: 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q3 2023 Calculation
Debt to capital = Total debt ÷ Total capital
= ÷ =
The financial data reflects the trends in total debt, total capital, and the debt to capital ratio over a five-year period from March 2019 to September 2023.
- Total Debt
- Total debt exhibited a gradual decline throughout the period analyzed. Beginning at $33,954 thousand in March 2019, it steadily decreased each quarter, reaching a stabilized value of $29,000 thousand by March 2022. This level of debt was maintained through September 2023, indicating that the company has effectively managed to reduce and then maintain its indebtedness at a relatively low and stable level over the recent years.
- Total Capital
- Total capital showed a consistent upward trend across the entire timeframe. Starting at $432,507 thousand in March 2019, total capital increased significantly each quarter, with only minor fluctuations around mid-2020. The growth accelerated notably after 2021, reaching $1,450,309 thousand by September 2023. This substantial increase in capital indicates an expansion of the company's financial base, which could be attributed to retained earnings, equity issuance, or other capital-raising activities.
- Debt to Capital Ratio
- The debt to capital ratio demonstrated a clear declining trend throughout the periods under review. Beginning at 0.08 in March 2019, the ratio steadily decreased to 0.02 by September 2023. This declining ratio reflects the relative reduction in debt compared to the growing capital base, signaling improved financial leverage and potentially lower financial risk. The consistency and gradual nature of the decline underscore a strategic emphasis on strengthening the company's capital structure by minimizing reliance on debt financing.
Debt to Assets
Paycom Software Inc., debt to assets calculation (quarterly data)
Based on: 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q3 2023 Calculation
Debt to assets = Total debt ÷ Total assets
= ÷ =
The analysis of the financial data over the indicated periods reveals several notable trends in the company's capital structure and asset base.
- Total Debt
- Total debt demonstrates a consistent gradual decrease from March 31, 2019, through September 30, 2023. Starting at approximately $33,954 thousand, total debt declined steadily each quarter, reaching a stable level of $29,000 thousand from March 31, 2022, onward. This downward trend indicates the company's focused effort on reducing its debt load over the observed periods, stabilizing the debt balance in the latest reported quarters.
- Total Assets
- Total assets exhibit significant variability over the quarters, showing both substantial increases and decreases. Initially, total assets declined from over $2,060,000 thousand at the start of 2019 to approximately $1,592,000 thousand by September 30, 2019. Following this decline, there was a pronounced rebound reflected in December 31, 2019, with assets rising to about $2,487,000 thousand. Throughout 2020 and early 2021, assets fluctuated considerably, with peaks and troughs evident, reaching a major peak of over $4,218,000 thousand in September 2021. Subsequently, the figures oscillated, showing a high of approximately $5,444,000 thousand as of March 31, 2022, followed by notable decreases and increases during the following quarters. Generally, this volatility signifies active asset management and possibly the acquisition or disposal of asset items affecting the total asset base.
- Debt to Assets Ratio
- The debt to assets ratio remained consistently low across all periods, ranging between 0.01 and 0.02. Such low ratios indicate a strong equity position relative to debt throughout the timeframe. Despite fluctuations in total assets and a decreasing debt balance, the ratio's stability reflects a prudent approach to leverage, maintaining financial stability and low indebtedness relative to the size of the asset base.
In summary, the company has steadily decreased its total debt and maintained a low debt-to-asset ratio, underscoring a conservative financial structure. However, the total assets have experienced considerable volatility, suggesting dynamic asset management strategies or market influences impacting asset valuation over the reported periods.
Financial Leverage
Paycom Software Inc., financial leverage calculation (quarterly data)
Based on: 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q3 2023 Calculation
Financial leverage = Total assets ÷ Stockholders’ equity
= ÷ =
The analysis of the quarterly financial data reveals several notable trends regarding the company's total assets, stockholders’ equity, and financial leverage over the examined periods.
- Total Assets
- The total assets exhibited considerable fluctuation throughout the quarters. Initially, assets decreased from approximately 2.06 billion US dollars at the beginning of 2019 to about 1.59 billion by September 2019. This was followed by a significant increase to nearly 2.49 billion by the end of the same year. During 2020, assets again showed volatility with values ranging between 1.92 billion and 2.61 billion US dollars. In 2021, there was a substantial increase with total assets peaking at over 4.21 billion US dollars in the third quarter, though this was followed by a sharp drop to roughly 3.22 billion in the following quarter. The trend continued in 2022 with another peak reaching approximately 5.44 billion US dollars in the first quarter, but assets then declined to around 3.31 billion by the third quarter. In 2023, total assets stabilized in the range of about 3.85 to 4.24 billion US dollars, indicating a more consistent asset base relative to prior years.
- Stockholders’ Equity
- Stockholders’ equity presented a generally upward trajectory over the entire period under review. Starting from around 399 million US dollars in early 2019, equity consistently increased quarter-over-quarter, reaching approximately 892 million by the end of 2021. This growth trend persisted in 2022 and 2023, with equity rising to about 1.07 billion by the third quarter of 2022, then continuing to increase to roughly 1.42 billion by the latest quarter reported. The steady rise in equity indicates strengthening shareholder value and retained earnings accumulation despite variations in total assets.
- Financial Leverage
- The financial leverage ratio, reflecting the relationship between total assets and stockholders’ equity, displayed notable variability. Initially, it decreased from 5.18 in March 2019 to a low near 3.35 by September 2019, signaling reduced reliance on debt relative to equity. However, leverage spiked again to about 4.72 at the end of 2019, followed by fluctuations between approximately 3.28 and 4.00 throughout 2020. In 2021, leverage showed volatility, increasing from 4.08 to a peak of 5.11 before dropping significantly to 3.60. The subsequent years exhibited a downward trend in leverage, falling to 3.08 in the third quarter of 2022 and further declining to around 2.71 by the latest quarter in 2023. This decreasing leverage trend suggests a gradual strengthening of the company’s equity base relative to its assets, potentially indicating lower financial risk and increased solvency.
Overall, the company’s financial position appears to have improved in terms of equity growth and reduced financial leverage despite the volatile asset base. The stabilization and improvement in leverage metrics along with strengthening equity balances could reflect enhanced financial stability and capacity for sustained growth.
Interest Coverage
Paycom Software Inc., interest coverage calculation (quarterly data)
Based on: 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q3 2023 Calculation
Interest coverage
= (EBITQ3 2023
+ EBITQ2 2023
+ EBITQ1 2023
+ EBITQ4 2022)
÷ (Interest expenseQ3 2023
+ Interest expenseQ2 2023
+ Interest expenseQ1 2023
+ Interest expenseQ4 2022)
= ( + + + )
÷ ( + + + )
=
The financial trends observed over the analyzed period reveal significant fluctuations in the Earnings Before Interest and Tax (EBIT), interest expense, and interest coverage ratios for the company.
- Earnings Before Interest and Tax (EBIT)
- The EBIT values demonstrate a pattern of variability with notable increases and decreases across quarters. Initially, EBIT started at approximately $62.4 million in March 2019 and declined slightly by the end of 2019, reaching a low of about $50.8 million in the third quarter of 2019. The first quarter of 2020 saw a substantial increase to roughly $88.3 million, followed by a sharp decline to around $26.7 million in the second quarter of 2020. The EBIT recovered gradually during the remainder of 2020, reaching approximately $36.6 million by year-end.
- From 2021 onward, EBIT generally trended upwards, peaking markedly at about $166.4 million in the first quarter of 2023. While some quarters experienced declines, the overall trajectory was one of growth, indicating improved operating profitability over time with notable peaks in March 2022 and March 2023.
- Interest Expense
- The interest expense remained relatively low from 2019 through mid-2020, with figures mostly under $300,000, and minimal values during several quarters when data was missing or zero. However, from early 2022 onwards, there was an observable increase in interest expense, peaking near $1.0 million in the third quarter of 2022 and late 2022, then declining somewhat in 2023 but remaining elevated compared to earlier years. This suggests a rise in borrowing costs or increased debt obligations in more recent periods.
- Interest Coverage Ratio
- The interest coverage ratio exhibited extremely high values throughout most of the series, indicating strong ability to cover interest expenses with EBIT. From 2019 to 2020, ratios frequently exceeded 150 and even reached a peak above 9,700 in late 2020, reflecting very low interest expenses relative to EBIT.
- The ratio data is incomplete for some intervals, but from 2022 forward, interest coverage decreased significantly compared to prior peaks, settling between roughly 130 and 550. Despite these reductions, the ratio remains well above typical risk thresholds, indicating continued comfortable coverage of interest obligations.
Overall, the data reveals growing operating earnings with variability possibly driven by external factors or operational dynamics. The steady increase in interest expense in recent years, coupled with declining but still strong interest coverage ratios, suggests careful monitoring of financing strategy is warranted. The company maintains strong operating profitability and appears to sustain adequate ability to meet interest expenses despite increasing debt-related costs.