In the Oakmark Select Fund's 2nd-Quarter Commentary 2024 Q2, Paycom Software (PAYC, Financial) was identified as the top detractor. The company's stock faced challenges following the release of mixed first-quarter results and the unexpected resignation of Co-CEO Chris Thomas. The fund attributes Paycom's softer-than-expected performance to a challenging macro environment for payroll software. Despite these hurdles, the fund remains confident in Paycom's long-term prospects, citing the company's strategic steps to improve operational performance. At its current valuation, Paycom trades at 4x revenue, which the fund considers undervalued for a profitable, growing software business.
"Paycom Software was the top detractor during the quarter. The U.S.-based payroll software company’s stock underperformed following the release of mixed first quarter results and the resignation of Co-CEO Chris Thomas. We believe Paycom’s softer than expected results are largely attributable to a weak macro environment for payroll software and that Paycom is taking the right steps to improve operational performance, which should enable a return to healthy revenue growth when the market improves. And although the Co-CEO’s resignation was a negative surprise, we spoke with founder and CEO Chad Richison following the announcement and, following the conversation, remain confident in the company’s long-term prospects. At the current price, Paycom trades for 4x revenue which we believe is too cheap for highly profitable, growing software business." — Bill Nygren (Trades, Portfolio), Oakmark Select Fund, Q2 2024 Fund Letter
Read full letter at gurufocus Bill Nygren's Oakmark Select Fund's 2nd-Quarter Commentary 2024 Q2 page.
