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Paycom Software (PAYC) has seen significant downturns, facing slowing growth and increased competition in the payroll software sector. In its latest quarter, the company reported low-teens revenue growth, marking a drastic decline from previous rates above 25%, and it has since received a Zacks Rank of #5 (Strong Sell).
Margins have fallen from over 40% due to increased spending on client retention and competition from firms like Paylocity (PCTY), ADP, and Workday (WDAY). Furthermore, analyst EPS forecasts for Paycom have been cut, reflecting bearish sentiment as forward P/E ratios have declined from the 70s to the low 20s, jeopardizing investor confidence.
The rollout of Paycom’s automated payroll platform “Betty” is causing existing customers to reduce their usage fees, compounding the company’s challenges. As analyst expectations continue to slide, Paycom’s future growth potential remains uncertain.
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