Reviewing SAP (SAP) & Paycom Software (PAYC)

Paycom Software (NYSE: PAYC) and SAP (NYSE:SAP) are both mid-cap technology companies, but which is the better investment? We will compare the two businesses based on the strength of their valuation, profitability, risk, institutional ownership, analyst recommendations, earnings and dividends.

Analyst Recommendations

This is a summary of current ratings and price targets for Paycom Software and SAP, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Paycom Software 0 5 11 0 2.69
SAP 1 5 10 0 2.56

Paycom Software presently has a consensus price target of $85.50, indicating a potential downside of 1.67%. SAP has a consensus price target of $100.30, indicating a potential downside of 9.38%. Given Paycom Software’s stronger consensus rating and higher probable upside, research analysts plainly believe Paycom Software is more favorable than SAP.

Dividends

SAP pays an annual dividend of $0.98 per share and has a dividend yield of 0.9%. Paycom Software does not pay a dividend. SAP pays out 28.9% of its earnings in the form of a dividend.

Earnings & Valuation

This table compares Paycom Software and SAP’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Paycom Software $329.14 million 15.39 $43.84 million $1.06 82.03
SAP $24.42 billion 5.57 $3.85 billion $3.39 32.65

SAP has higher revenue and earnings than Paycom Software. SAP is trading at a lower price-to-earnings ratio than Paycom Software, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Paycom Software and SAP’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Paycom Software 15.37% 44.27% 5.67%
SAP 15.80% 15.43% 8.93%

Volatility and Risk

Paycom Software has a beta of 1.67, indicating that its stock price is 67% more volatile than the S&P 500. Comparatively, SAP has a beta of 1.14, indicating that its stock price is 14% more volatile than the S&P 500.

Insider and Institutional Ownership

88.4% of Paycom Software shares are held by institutional investors. Comparatively, 3.7% of SAP shares are held by institutional investors. 17.9% of Paycom Software shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Summary

Paycom Software beats SAP on 10 of the 16 factors compared between the two stocks.

Paycom Software Company Profile

Paycom Software, Inc. is a provider of a cloud-based human capital management (HCM) software solution delivered as Software-as-a-Service (SaaS). The Company provides functionality and data analytics that businesses need to manage the complete employment life cycle from recruitment to retirement. The Company’s applications streamline client processes and provide clients and their employees with the ability to directly access and manage administrative processes, including applications that identify candidates, on-board employees, manage time and labor, administer payroll deductions and benefits, manage performance, terminate employees and administer post-termination health benefits, such as COBRA. The Company’s solution allows clients to analyze employee information to make business decisions. The Company’s HCM solution offers a range of applications, including talent acquisition, time and labor management, payroll, talent management and human resources (HR) management.

SAP Company Profile

SAP SE (SAP) is a software and service provider. The Company offers enterprise application software. The Company operates through two segments: Applications, Technology & Services segment, and the SAP Business Network segment. The Applications, Technology & Services segment is engaged in the sale of software licenses, subscriptions to its cloud applications, and related services (primarily support services and various professional services, and support services, as well as implementation services of its software products and education services on the use of its products). The SAP Business Network segment includes its cloud-based collaborative business networks and services relating to the SAP Business Network (including cloud applications, professional services and education services). Within the SAP Business Network segment, the Company markets and sells the cloud offerings developed by SAP Ariba, SAP Fieldglass and Concur.

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