Analysis of Profitability Ratios
Quarterly Data
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
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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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Profitability Ratios (Summary)
Paycom Software Inc., profitability 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).
- Gross Profit Margin
- The gross profit margin has remained relatively stable over the observed periods, consistently above 84%. A slight upward trend is noticeable from early 2019 until late 2020, peaking around 85.84%, followed by a gradual decline approaching 84% by the third quarter of 2023. This stability indicates consistent control over production costs relative to revenue.
- Operating Profit Margin
- The operating profit margin shows more variability. It initially hovers around 30% during 2019, peaks at approximately 32.43% in the first quarter of 2020, then declines significantly through 2020, reaching a low near 22.12% by the end of 2020. From 2021 onward, there is a gradual recovery with the margin improving steadily to roughly 27.64% by the third quarter of 2023. This pattern suggests operational challenges in 2020, followed by effective cost management and operational efficiency improvements in subsequent years.
- Net Profit Margin
- The net profit margin follows a somewhat similar trend to operating profit margin but at lower levels, reflecting expenses beyond operating costs. Starting around 23.38% in early 2019, it rises to a peak near 25.16% in the first quarter of 2020, then drops to a low of approximately 17.05% by the end of 2020. There is a steady recovery trend thereafter, with net margin rising to about 20.8% in late 2023. This indicates that while profitability was impacted during 2020, likely due to non-operating costs or external factors, recovery efforts have been effective.
- Return on Equity (ROE)
- ROE exhibits a downward trend from about 35.93% in 2019 to a low near 19.46% in the first quarter of 2021. After this point, it gradually improves, reaching nearly 23.85% by the third quarter of 2023. The initial decline may reflect reduced profitability or increased equity base, while the later improvement suggests enhanced efficiency in generating profits from shareholder equity.
- Return on Assets (ROA)
- Return on assets shows notable volatility. It starts at a relatively low 6.94% in early 2019, rises to 10.47% by the third quarter of that year, then declines sharply to near 4.07% in late 2021. A rebound occurs thereafter, with ROA improving to approximately 8.79% by the third quarter of 2023. This volatility implies fluctuations in asset utilization efficiency, possibly linked to changes in asset base or profit generation capacity during the analyzed periods.
Return on Sales
Return on Investment
Gross Profit Margin
Paycom Software Inc., gross profit margin 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
Gross profit margin = 100
× (Gross profitQ3 2023
+ Gross profitQ2 2023
+ Gross profitQ1 2023
+ Gross profitQ4 2022)
÷ (RevenuesQ3 2023
+ RevenuesQ2 2023
+ RevenuesQ1 2023
+ RevenuesQ4 2022)
= 100 × ( + + + )
÷ ( + + + )
=
- Gross Profit
- The gross profit displays a generally upward trend over the observed periods. Starting from approximately $170.6 million in March 2019, it experienced fluctuations in the short term but overall increased substantially, reaching over $386.4 million by March 2023. Notable increases occurred in early 2020 and again from late 2021 onward, indicating periods of robust profitability growth. Despite some mid-period declines, the overall pattern suggests consistent expansion in gross profit over the span of these quarterly results.
- Revenues
- Revenues follow a similar upward trajectory as gross profit, beginning at roughly $199.9 million in March 2019 and advancing to over $451.6 million by March 2023. The data exhibits significant growth spikes around early 2020 and sustained increases from late 2021 through early 2023. Although some quarters experienced revenue dips, the overall growth trend in revenues aligns with the increases seen in gross profit, reflecting expanding market activity and sales performance.
- Gross Profit Margin
- Gross profit margin percentages remained relatively stable throughout the periods, fluctuating modestly between approximately 84% and 85.8%. This stability suggests effective cost management relative to revenues, with margins maintaining a high and consistent level despite the growth in both gross profit and revenues. A slight downward drift in the margin can be observed towards the latest quarters, but it remains within a narrow range, indicating sustained operational efficiency.
- Summary of Trends and Insights
- The company demonstrates strong and consistent growth in both gross profit and revenues over the four-year timeframe, suggesting successful expansion of its business operations. The steadiness of the gross profit margin highlights effective control over cost of goods sold relative to sales. The observed fluctuations in quarterly figures could relate to seasonality or market-specific factors but do not detract from the clear positive longer-term growth pattern. The combination of rising top-line revenue and growing gross profit with stable margins points to robust financial health and productive operational scaling.
Operating Profit Margin
Paycom Software Inc., operating profit margin 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
Operating profit margin = 100
× (Operating incomeQ3 2023
+ Operating incomeQ2 2023
+ Operating incomeQ1 2023
+ Operating incomeQ4 2022)
÷ (RevenuesQ3 2023
+ RevenuesQ2 2023
+ RevenuesQ1 2023
+ RevenuesQ4 2022)
= 100 × ( + + + )
÷ ( + + + )
=
- Revenue Trends
- Revenues exhibit a generally upward trajectory over the analysis period, rising from approximately 200 million US dollars in the first quarter of 2019 to over 450 million US dollars by the first quarter of 2023. Despite some fluctuations, the overall growth indicates increasing sales or service volume. Notable seasonal or cyclical increases occur during the first and last quarters of most years.
- Operating Income Patterns
- Operating income demonstrates greater variability compared to revenues. Starting near 62 million dollars in early 2019, it generally reflects the revenue trend, reaching a high of over 160 million dollars by the first quarter of 2023. However, there are quarters, particularly in 2020, where operating income dips significantly below revenues' relative growth, suggesting transient operational challenges or increased expenses during those periods. The latter part of the timeline shows stronger operating income performance alongside revenue growth.
- Operating Profit Margin Analysis
- The operating profit margin shows variability but remains within a range of roughly 22% to 32%. The highest margins occur early in the timeframe, nearing 32% in the first quarter of 2020, followed by a downward adjustment through 2020 to levels just above 20%. From 2021 onwards, margins recover gradually and stabilize around the 25-28% range. This recovery signifies improved cost control or operational efficiency despite increasing revenue.
- Insights on Financial Performance
- The data suggests a company experiencing substantial revenue growth while managing fluctuating operating income and profit margins. The initial spike in margins prior to 2020 may reflect strong operational leverage, which was partially eroded in 2020, possibly linked to broader economic disruptions. The subsequent restoration and steadiness in margins alongside rising revenues and operating incomes into 2023 highlight effective adaptation to market conditions and operational improvements.
Net Profit Margin
Paycom Software Inc., net profit margin 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
Net profit margin = 100
× (Net incomeQ3 2023
+ Net incomeQ2 2023
+ Net incomeQ1 2023
+ Net incomeQ4 2022)
÷ (RevenuesQ3 2023
+ RevenuesQ2 2023
+ RevenuesQ1 2023
+ RevenuesQ4 2022)
= 100 × ( + + + )
÷ ( + + + )
=
- Revenue Trends
- Revenues exhibited a generally upward trend over the observed periods, starting from approximately $200 million in early 2019 and reaching about $451.6 million by the first quarter of 2023. Despite some fluctuations, such as a noticeable dip in the second quarter of 2020, revenues consistently recovered and achieved new highs by 2023, suggesting strong top-line growth.
- Net Income Patterns
- Net income showed volatility across quarters with notable peaks and troughs. Early 2019 values were around $47 million, followed by dips in mid-2020, correlating with periods of reduced revenues. Subsequent quarters demonstrated recovery and new highs, reaching approximately $119.3 million in early 2023. Some quarters, notably third quarters of 2021 and 2022, showed lower profitability despite strong revenues, indicating variability in earnings quality or increased costs.
- Net Profit Margin Analysis
- The net profit margin fluctuated within a range of approximately 16% to 25%, without a consistent trend upward or downward. It peaked around 25% in early 2020 before slipping to lower levels in subsequent quarters, reaching mid-to-high teens around 2020 and early 2021, then stabilizing around 20% towards 2023. Margins demonstrate resilience despite revenue growth, reflecting effective management of expenses relative to income fluctuations.
- Overall Insights
- The data reflects a company with strong revenue growth sustaining over multiple years, accompanied by variable yet generally increasing net income levels. Profit margins, while somewhat volatile, remain healthy and stable around 20%, indicating balanced operational efficiency amid growth. Periods of revenue decline correspond with reduced profitability, but the company shows effective recovery and maintains solid financial performance through the observed quarters.
Return on Equity (ROE)
Paycom Software Inc., ROE 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
ROE = 100
× (Net incomeQ3 2023
+ Net incomeQ2 2023
+ Net incomeQ1 2023
+ Net incomeQ4 2022)
÷ Stockholders’ equity
= 100 × ( + + + )
÷ =
The analysis of the quarterly financial performance over the observed periods reveals several noteworthy trends in profitability, equity growth, and return on equity (ROE).
- Net Income
- Net income exhibited significant fluctuations across the quarters. Initially, net income showed a pattern of moderate growth through 2019, peaking at 63,015 thousand US dollars at the end of the first quarter in 2020. This was followed by a sharp decline in the subsequent quarters of 2020, reaching a low of 24,367 thousand US dollars by year-end. A strong recovery occurred in 2021 with net income bouncing back notably in the first quarter to 64,616 thousand US dollars. The figures remained volatile but generally trended upwards through 2022 and into 2023, culminating in its highest level of 119,296 thousand US dollars in the first quarter of 2023. However, mid-2023 quarters showed some moderation but stayed within a generally elevated range compared to earlier years.
- Stockholders’ Equity
- Stockholders’ equity consistently increased each quarter, reflecting steady growth in the company's net assets. The equity rose from approximately 398,553 thousand US dollars in the first quarter of 2019 to over 1.42 billion US dollars by the third quarter of 2023. This consistent expansion denotes ongoing capital retention or infusion and suggests a robust balance sheet with gradually increasing shareholder value.
- Return on Equity (ROE)
- ROE started at a high level near 36% in early 2019, indicating strong profitability relative to equity. Over the course of 2019 and 2020, ROE showed a declining trend, bottoming out at approximately 21.88% by the end of 2020. This fall corresponds with the decreased net income in 2020 despite growing equity, indicating less efficient use of equity base to generate profits. Starting in 2021, ROE stabilized in a range between roughly 20.8% and 23.85%, showing modest improvement and a more consistent profitability level relative to equity invested. This suggests that although net income fluctuated, the company maintained a reasonable level of profitability against its equity base in recent years.
Overall, the data presents a picture of strong equity growth and fluctuating yet recovering net income, with ROE retreating from earlier highs but remaining at a solid mid-20% range. The substantial increase in net income in early 2023 may indicate improved operational performance or favorable market conditions. Continued monitoring of profitability trends relative to equity will be essential for assessing future returns to shareholders.
Return on Assets (ROA)
Paycom Software Inc., ROA 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
ROA = 100
× (Net incomeQ3 2023
+ Net incomeQ2 2023
+ Net incomeQ1 2023
+ Net incomeQ4 2022)
÷ Total assets
= 100 × ( + + + )
÷ =
- Net Income
- The net income exhibited significant volatility across the observed quarters. Initially, it increased from approximately $47 million in early 2019 to a peak exceeding $63 million by the first quarter of 2020. This was followed by a marked decline during mid-2020, dropping to around $24 million by the end of that year. Subsequently, net income recovered, showing sharp increases through 2021 and early 2022, reaching a high of about $92 million in the first quarter of 2022. Thereafter, the figure experienced fluctuations but generally maintained elevated levels above $50 million, culminating in a peak near $119 million in the first quarter of 2023 before a slight decrease in subsequent quarters.
- Total Assets
- Total assets demonstrated a generally upward trend over the period analyzed, with some irregularities. Starting at approximately $2.06 billion at the beginning of 2019, there was a decline during mid-2019 to about $1.59 billion, followed by a recovery and growth that pushed assets beyond $3.4 billion by early 2021. A notable peak occurred around the first quarter of 2022, with assets surpassing $5.44 billion. After this peak, total assets decreased significantly, reaching approximately $3.31 billion at the end of 2022, but then showed a moderate increase and minor fluctuations, stabilizing around $3.85 billion by the third quarter of 2023.
- Return on Assets (ROA)
- The return on assets percentage displayed considerable variability and no clear long-term trend, highlighting fluctuating profitability relative to total assets. Initially, ROA rose from around 7% at the beginning of 2019 to a peak exceeding 10% in the third quarter of that year. This was followed by a decline throughout late 2019 and 2020, reaching lows near 4% to 5.5%. In 2021 and 2022, ROA remained mostly below 7%, dipping to near 4% at times. However, from late 2022 into 2023, ROA improved steadily, rising from the mid-7% range to nearly 9% by the third quarter of 2023. This indicates improved efficiency in generating net income from assets during the later period analyzed.
- Overall Insights
- The data reflects periods of strong financial growth interspersed with episodes of contraction or volatility. Net income, while generally increasing over the longer term, experienced sharp downturns particularly during mid-2020. Total assets expanded substantially, with a peak early in 2022 followed by a correction. The fluctuation in ROA suggests variability in operational efficiency or profitability management relative to asset base, with notable improvement in the most recent quarters. These patterns may reflect changes in business conditions, investment activities, or market factors affecting both income generation and asset management.