Model N (MODN) vs. Paycom Software (PAYC) Critical Contrast

Model N (NYSE: MODN) and Paycom Software (NYSE:PAYC) are both computer and technology companies, but which is the better stock? We will compare the two businesses based on the strength of their institutional ownership, earnings, risk, profitability, dividends, analyst recommendations and valuation.

Valuation and Earnings

This table compares Model N and Paycom Software’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Model N $131.17 million 3.81 -$39.54 million ($1.29) -13.14
Paycom Software $433.05 million 13.45 $66.80 million $1.13 87.10

Paycom Software has higher revenue and earnings than Model N. Model N 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 Model N and Paycom Software’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Model N -26.17% -55.03% -14.12%
Paycom Software 15.43% 46.27% 5.76%

Institutional and Insider Ownership

67.3% of Model N shares are owned by institutional investors. Comparatively, 89.4% of Paycom Software shares are owned by institutional investors. 18.9% of Model N shares are owned by insiders. Comparatively, 17.9% of Paycom Software shares are owned by 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.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Model N and Paycom Software, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Model N 0 2 4 0 2.67
Paycom Software 0 4 12 0 2.75

Model N currently has a consensus target price of $18.00, suggesting a potential upside of 6.19%. Paycom Software has a consensus target price of $89.63, suggesting a potential downside of 8.94%. Given Model N’s higher possible upside, equities research analysts clearly believe Model N is more favorable than Paycom Software.

Volatility & Risk

Model N has a beta of 1.06, suggesting that its stock price is 6% more volatile than the S&P 500. Comparatively, Paycom Software has a beta of 1.7, suggesting that its stock price is 70% more volatile than the S&P 500.

Summary

Paycom Software beats Model N on 11 of the 13 factors compared between the two stocks.

Model N Company Profile

Model N, Inc. is a provider of revenue management solutions for life science and technology companies. The Company’s solutions enable its customers to maximize revenues and reduce revenue compliance risk by transforming their revenue life cycle from a series of tactical, disjointed operations into a strategic end-to-end process. The Company’s solutions include Revenue Enterprise Cloud, Revenue Intelligence Cloud and Revvy Revenue Management. The Company provides solutions that span the organizational and operational boundaries of functions, such as sales, marketing and finance, and serve as a system of record for revenue management processes, including pricing, contracts, rebates, incentives and regulatory compliance. The Company’s application suites are designed to work with enterprise resource planning (ERP) and customer relationship management (CRM) applications. The Company also offers implementation services, managed services, strategic services and customer support.

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.

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