In this clip from "The Rank" on Motley Fool Live, recorded on Feb. 7, Motley Fool contributor Matt Frankel discusses the growth potential and ongoing expansion of Paycom (PAYC 1.22%) and analyzes how it differentiates itself from competitors.
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Matt Frankel: Paycom, as we mentioned a little bit earlier in the show, we already talked about Ceridian (CDAY 0.62%). Paycom is not just a payroll services provider, but they are a HR management software company that focuses on the smaller end of businesses. They are gradually expanding into large companies because that's what you have to do when you get bigger, like we've seen [Block, Inc.] Square (SQ 5.02%) start off as a small enterprise company expanding into bigger companies. Their mission is to democratize the HR management software industry. They want to make HR software for small businesses just as effective as what the big guys have. They do things like Cowen (COWN) acquisition software. They help with onboarding. They do attendance tracking and scheduling. They have their payroll software, which is their core business. They have performance software that measures worker performance, offers trading opportunities, allows employees to schedule training, benefits management services that can help with health insurance, retirement plans, and things like that. They offer a full range of services to their customers. So far, they've captured about 5% of their addressable market so they have gotten a lot of traction especially when you consider some of the big guns that they're up against, like ADP (ADP -0.07%) and Paychex (PAYX 0.53%). Their growth is still pretty strong, which is why I ranked this toward the top of the pack. Revenue growth was 30% year-over-year. In the most recent quarter, adjusted net income, they are profitable on an adjusted basis anyway, was up 32%, which was at the high end of their guidance so they're growing really fast. I think as job and wage growth, it's definitely trending in the right direction in the United States. I think that's a trend that's a tailwind for this company as opposed to some of the others. In the first half of the show that have had some headwinds in 2022. That's why I rank Paycom where I did. Guys, anything to add there?
Jason Hall: I think it's being a platform versus Ceridian, that's more of a feature like a single tool operator, is a competitive advantage. I think it's going to grow at a slower rate and that's the reason that I rated it where I did. I just don't think it has as great of a growth prospect like some of these other companies do. Great business though.