Paycom leads mid-cap tech picks on valuation and capital efficiency

Paycom (PAYC) emerged as the top mid-cap technology stock based on valuation and capital efficiency, as per a screener analysis. Its current price of $220.96, market capitalization of $9.75 billion, P/E ratio of 23.6x, revenue growth of 9.2%, and ROIC of 27.9% stood out among the reviewed companies. The fair value upside of 32.4% further highlights its attractiveness.

In comparison, Bentley Systems (BSY) with a price of $32.02, market cap of $9.91 billion, P/E ratio of 35.1x, revenue growth of 12.8%, and ROIC of 13.6% showed stronger growth potential, but with a higher valuation and less efficient capital use. Paycom's 27.9% ROIC is more than double that of Bentley Systems, indicating better capital efficiency.

The valuation of Paycom also appears more favorable, with a P/E ratio of 23.6x and a PEG ratio of 0.76, while Bentley Systems trades at a higher P/E ratio of 35.1x and a PEG ratio of 2.14. Paycom's financials are further supported with a 5.9% FCF yield and an 11.7% one-year return. The analysis suggests that Paycom is a quality stock at a reasonable price, rather than a growth or momentum play.

Bentley Systems, on the other hand, has a more growth-oriented profile but with a higher valuation that limits the room for execution delays. Overall, Paycom (PAYC) is the standout choice for investors seeking a balance of quality and reasonable valuation, while Bentley Systems (BSY) is a more growth-oriented alternative.