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Paycom Software, Inc. (PAYC) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Paycom Software, Inc. (PAYC)

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Intrinsic Value (DCF)

Current$152.78
→
Intrinsic$208.97
+37%
$144.11$208.97$332.06
Market implies 15% growth for 5 years
DCF analysis suggests PAYC could have 37% upside at 24% growth — verify assumptions match your view.
At $153, the market prices in continued high-teens cash flow growth (15%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $144 → Bull $332. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →20%22%24%26%
8%$255$275$297$320
10%$180$194$209$225
12%$139$149$160$172
14%$113$121$130$139

Bull Case

  • Bull case ($332) offers 117% upside at 28% growth, 9% discount
  • 27% margin of safety vs. base case estimate
  • Market-implied growth (15%) ≤ historical CAGR (24%)

Bear Case

  • Bear case ($144) implies 6% downside at 19% growth, 12% discount
  • Using 24% growth — aggressive, watch for mean reversion
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5-Year Free Cash Flow Projection

Year 1$421.54M
Year 2$521.10M
Year 3$644.17M
Year 4$796.31M
Year 5$984.38M
Terminal$14.48B

📐 Model Inputs

Growth Rate23.6%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$341.00MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is PAYC stock undervalued or overvalued?
🟢 UNDERVALUED

PAYC trades at $152.78 vs. our DCF-derived intrinsic value of $182.97, implying +17% upside. At a 10.0% WACC and 23.6% projected FCF growth, the market appears to be underpricing the present value of PAYC's future cash flows. The bear case ($121.96) still suggests upside, providing margin of safety.

What is PAYC's intrinsic value?

Using a 5-year DCF model: Base FCF of $341M, projected at 23.6% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-319M net debt and dividing by 0.06B shares: Bear $121.96 | Base $182.97 | Bull $272.82. Current price $152.78 implies +17% to base case.

How is PAYC's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 23.6% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($9.98B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 29.3x.