Paycom Software, Inc. (NYSE:PAYC) shareholders might be concerned after seeing the share price drop 14% in the last month. But that doesn't undermine the fantastic longer term performance (measured over five years). Indeed, the share price is up a whopping 682% in that time. So it might be that some shareholders are taking profits after good performance. Only time will tell if there is still too much optimism currently reflected in the share price.
It really delights us to see such great share price performance for investors.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Paycom Software achieved compound earnings per share (EPS) growth of 34% per year. This EPS growth is slower than the share price growth of 51% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth. This optimism is visible in its fairly high P/E ratio of 129.31.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Paycom Software's key metrics by checking this interactive graph of Paycom Software's earnings, revenue and cash flow.
A Different Perspective
Paycom Software provided a TSR of 6.0% over the last twelve months. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 51% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for Paycom Software you should be aware of.
We will like Paycom Software better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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