Personal Finance

It’s Time to Get Greedy With Paycom Software Inc Stock

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That's crucial, because Paycom's sales force is the key to its future. Consider: most companies have a payroll provider that they've been using for years. Because of the aforementioned high switching costs, these companies don't want to switch over to Paycom unless they have a really good reason to.

That's where Paycom's sales force comes in -- they have to wow HR departments enough to convince them that switching over is worth the headache. And that's why I'll continue to watch the Glassdoor reviews, as well as continue to make sure Richardson is running the company with his skin in the game.

Independence during tough times

Finally, I think it's crucial to invest in companies that don't rely too heavily on any one customer. With Paycom, no one customer accounts for more than half of 1% of all sales. That means that if any one customer decides to leave Paycom, it doesn't necessarily mean that it would make a significant dent in Paycom's prospects.

The company has also been able to continue growing its cash hoard while not taking on copious levels of debt.

Cash and Debt at Paycom

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You won't find that at every Software-as-a-Service (SaaS) company out there -- and it sets Paycom apart. When the company experiences its next rough patch -- whatever the cause may be -- the cash on hand will provide flexibility to help it survive and thrive over the long run.

Putting my own skin in the game

When Motley Fool trading rules allow, I will be getting greedy with Paycom myself, adding a position to my portfolio despite the "expensive" looking P/E of 67. In the end, I think we might look at today's price as a steal.

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Brian Stoffel has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Paycom Software. The Motley Fool recommends Automatic Data Processing. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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