Common Stock Valuation Ratios (Price Multiples)
Valuation ratios measure the quantity of an asset or flaw (e.g., earnings) associated with ownership of a specified claim (e.g., a share of ownership of the enterprise).
Current Valuation Ratios
Paycom Software Inc., current price multiples
| Paycom Software Inc. | Industrials | ||
|---|---|---|---|
| Selected Financial Data | |||
| Current share price (P) | $162.66 | ||
| No. shares of common stock outstanding | 57,700,820 | ||
| Growth rate (g) | 28.23% | ||
| Earnings per share (EPS) | $4.88 | ||
| Next year expected EPS | $6.25 | ||
| Operating profit per share | $6.56 | ||
| Sales per share | $23.83 | ||
| Book value per share (BVPS) | $20.50 | ||
| Valuation Ratios (Price Multiples) | |||
| Price to earnings (P/E) | 33.35 | 48.55 | |
| Price to next year expected earnings | 26.01 | 46.66 | |
| Price-earnings-growth (PEG) | 1.18 | 11.97 | |
| Price to operating profit (P/OP) | 24.79 | 26.74 | |
| Price to sales (P/S) | 6.82 | 2.42 | |
| Price to book value (P/BV) | 7.94 | 7.41 | |
Based on: 10-K (reporting date: 2022-12-31).
If the company price multiple is lower then the price multiple of benchmark then company stock is relatively undervalued.
Otherwise, if the company price multiple is higher then the price multiple of benchmark then company stock is relatively overvalued.
Historical Valuation Ratios (Summary)
Paycom Software Inc., historical price multiples
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).
- Price to Earnings (P/E) Ratio
- The P/E ratio exhibited a rising trend from 74.54 in 2018 to a peak of 161.62 in 2020, indicating increased market valuation relative to earnings. Subsequently, it declined to 97.02 in 2021 and further to 63.23 in 2022, suggesting a moderation in investor expectations or improved earnings performance in recent years.
- Price to Operating Profit (P/OP) Ratio
- This ratio followed a similar pattern to the P/E ratio, increasing from 58.82 in 2018 to a high of 124.57 in 2020, then decreasing to 74.98 in 2021 and further to 46.99 in 2022. The initial rise reflects growing investor optimism or expanding profit multiples, while the subsequent reductions indicate a correction or enhanced operating profitability.
- Price to Sales (P/S) Ratio
- The P/S ratio increased steadily from 18.04 in 2018 to 27.55 in 2020, signaling growing investor willingness to pay more for each dollar of sales. However, it sharply declined to 18.01 in 2021 and continued to decrease to 12.94 in 2022, pointing to a reevaluation of sales growth prospects or revenue quality after 2020.
- Price to Book Value (P/BV) Ratio
- The P/BV ratio rose moderately from 30.52 in 2018 to 35.36 in 2020, indicating elevated market valuation above book equity. Thereafter, it dropped to 21.27 in 2021 and further to 15.05 in 2022, suggesting either an increase in book value or a valuation adjustment downward, reflecting more conservative investor sentiment toward the company’s net asset value.
Price to Earnings (P/E)
Paycom Software Inc., historical P/E calculation, comparison to benchmarks
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).
1 Data adjusted for splits and stock dividends.
2 2022 Calculation
EPS = Net income ÷ No. shares of common stock outstanding
= 281,389,000 ÷ 57,871,962 = 4.86
3 Closing price as at the filing date of Paycom Software Inc. Annual Report.
4 2022 Calculation
P/E ratio = Share price ÷ EPS
= 307.45 ÷ 4.86 = 63.23
The financial data displays notable trends in share price, earnings per share (EPS), and the price-to-earnings (P/E) ratio over the five-year period.
- Share Price
- The share price increased significantly from $178.38 at the end of 2018 to a peak of $401.55 at the end of 2020. This was followed by a decline in 2021 to $327.72 and a further slight decrease in 2022 to $307.45. Overall, despite the recent downward trend, the share price remains well above the 2018 level, indicating strong market valuation growth over the period.
- Earnings Per Share (EPS)
- EPS rose from $2.39 in 2018 to $3.13 in 2019, then decreased to $2.48 in 2020. Starting in 2021, EPS increased substantially to $3.38 and further accelerated to $4.86 in 2022, reaching the highest level in the dataset. This progression shows an improving profitability trend particularly in the last two years, reflecting better earnings performance overall.
- Price-to-Earnings (P/E) Ratio
- The P/E ratio exhibits considerable volatility. It started at 74.54 in 2018, increased to a peak of 161.62 in 2020, then decreased notably to 97.02 in 2021 and further to 63.23 in 2022. This pattern suggests that while the company's earnings grew in recent years, the market valuation relative to earnings became more moderate after reaching a very high multiple in 2020.
In summary, the company experienced a significant rise in market valuation and share price until 2020, followed by a moderate decline through 2022. Earnings per share showed improvement especially after 2020, reflecting growing profitability. The P/E ratio's sharp peak in 2020 and subsequent decline indicates a correction in market pricing relative to earnings, moving from an extremely high valuation multiple to a more tempered level in recent years.
Price to Operating Profit (P/OP)
Paycom Software Inc., historical P/OP calculation, comparison to benchmarks
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).
1 Data adjusted for splits and stock dividends.
2 2022 Calculation
Operating profit per share = Operating income ÷ No. shares of common stock outstanding
= 378,679,000 ÷ 57,871,962 = 6.54
3 Closing price as at the filing date of Paycom Software Inc. Annual Report.
4 2022 Calculation
P/OP ratio = Share price ÷ Operating profit per share
= 307.45 ÷ 6.54 = 46.99
- Share Price Trend
- The share price exhibited a marked upward trajectory from 2018 through 2020, increasing from $178.38 to $401.55. However, a decline followed in subsequent years, with the share price decreasing to $327.72 in 2021 and further to $307.45 in 2022, indicating some volatility and correction after the peak in 2020.
- Operating Profit Per Share Trend
- Operating profit per share showed overall growth over the observed period, starting at $3.03 in 2018 and reaching $6.54 in 2022. Notably, there was a dip in 2020 to $3.22 from $3.92 in 2019, but this was followed by a recovery and substantial increase in the following years, with the highest value recorded in 2022.
- Price-to-Operating Profit Ratio (P/OP)
- The P/OP ratio reflects fluctuations that mirror changes in share price relative to operating profit per share. Initially, the ratio increased from 58.82 in 2018 to a peak of 124.57 in 2020, suggesting that share price growth outpaced operating profit growth during this period. Following this, the ratio declined to 74.98 in 2021 and further to 46.99 in 2022, pointing to either a relative undervaluation of the stock or improved operating profitability in comparison to share price.
- Overall Analysis
- The data indicates strong improvements in operating profitability per share over the five-year period, albeit with a noticeable dip in 2020. The share price reacted positively until 2020 but then diminished somewhat thereafter. The P/OP ratio's peak in 2020 and subsequent decline highlight a period where market expectations may have been elevated relative to actual profits, followed by a realignment between market price and operating performance by 2022.
Price to Sales (P/S)
Paycom Software Inc., historical P/S calculation, comparison to benchmarks
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).
1 Data adjusted for splits and stock dividends.
2 2022 Calculation
Sales per share = Revenues ÷ No. shares of common stock outstanding
= 1,375,218,000 ÷ 57,871,962 = 23.76
3 Closing price as at the filing date of Paycom Software Inc. Annual Report.
4 2022 Calculation
P/S ratio = Share price ÷ Sales per share
= 307.45 ÷ 23.76 = 12.94
- Share Price Trend
- The share price exhibited a significant upward trajectory from 2018 through 2020, rising from $178.38 to a peak of $401.55. However, following this peak, there was a decline in value over the next two years to $327.72 in 2021 and further down to $307.45 in 2022, indicating a partial retracement from its highest level.
- Sales Per Share Development
- Sales per share consistently increased throughout the entire period, beginning at $9.89 in 2018 and rising steadily each year to reach $23.76 in 2022. This reflects robust growth in revenue allocated on a per-share basis.
- Price-to-Sales (P/S) Ratio Evolution
- The P/S ratio increased sharply from 18.04 in 2018 to 27.55 in 2020, highlighting a period of rising market valuation relative to sales. Subsequently, the ratio decreased substantially to 18.01 in 2021 and further to 12.94 in 2022, suggesting that the market valuation per unit of sales diminished during these years despite ongoing sales growth.
- Overall Insights
- The data indicates that while the company's sales per share demonstrated solid growth, the market's valuation relative to sales (P/S ratio) was more volatile. The initial increase in share price and P/S ratio up to 2020 implies strong investor optimism, which tempered over the following two years as share prices declined and P/S ratios fell. This could suggest changing market perceptions about growth prospects or valuation expectations despite continued sales expansion.
Price to Book Value (P/BV)
Paycom Software Inc., historical P/BV calculation, comparison to benchmarks
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).
1 Data adjusted for splits and stock dividends.
2 2022 Calculation
BVPS = Stockholders’ equity ÷ No. shares of common stock outstanding
= 1,182,607,000 ÷ 57,871,962 = 20.43
3 Closing price as at the filing date of Paycom Software Inc. Annual Report.
4 2022 Calculation
P/BV ratio = Share price ÷ BVPS
= 307.45 ÷ 20.43 = 15.05
- Share Price Trends
- The share price showed a consistent increase from 2018 through 2020, rising from $178.38 to $401.55. However, in 2021 and 2022, the share price declined to $327.72 and $307.45 respectively, indicating a reversal of the previous upward momentum.
- Book Value per Share (BVPS) Trends
- The book value per share exhibited steady growth over the entire period. Starting at $5.84 in 2018, it increased each year, reaching $20.43 in 2022. This consistent rise suggests steady improvement in the company's net asset value on a per-share basis.
- Price-to-Book Value (P/BV) Ratio Trends
- The P/BV ratio, which measures market valuation relative to book value, initially rose from 30.52 in 2018 to a peak of 35.36 in 2020. Starting in 2021, this ratio dropped significantly to 21.27 and further to 15.05 by 2022. The decline in this ratio, despite the continuous growth in BVPS, indicates a reduction in market premium over the book value.
- Overall Observations
- The data reveal a period of rapid share price appreciation and increasing market valuation relative to book value through 2020, followed by a notable correction in share price and valuation multiples in 2021 and 2022. Meanwhile, the fundamental measure of book value per share improved consistently, reflecting strengthening balance sheet fundamentals. The decreasing P/BV ratio in recent years may suggest that the market is assigning a lower valuation multiple to the company's net assets, possibly due to changing market conditions or investor sentiment.