Critical Analysis: Paycom Software (NYSE:PAYC) vs. AppFolio (NASDAQ:APPF)

Paycom Software (NYSE:PAYC) and AppFolio (NASDAQ:APPF) are both computer and technology companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, institutional ownership, valuation, risk and profitability.

Volatility and Risk

Paycom Software has a beta of 1.14, suggesting that its share price is 14% more volatile than the S&P 500. Comparatively, AppFolio has a beta of 0.87, suggesting that its share price is 13% less volatile than the S&P 500.

Earnings and Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Paycom Software	$1.82 billion	6.58	$340.79 million	$8.31	25.03
AppFolio	$762.37 million	12.02	$2.70 million	$3.59	70.27

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Paycom Software	25.78%	32.90%	11.07%
AppFolio	17.26%	30.64%	23.53%

Institutional and Insider Ownership

87.8% of Paycom Software shares are held by institutional investors. Comparatively, 85.2% of AppFolio shares are held by institutional investors. 14.5% of Paycom Software shares are held by insiders. Comparatively, 5.2% of AppFolio shares are held 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 recent recommendations and price targets for Paycom Software and AppFolio, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Paycom Software	0	11	0	0	2.00
AppFolio	1	2	5	0	2.50

Paycom Software currently has a consensus price target of $199.75, indicating a potential downside of 3.97%. AppFolio has a consensus price target of $261.88, indicating a potential upside of 3.80%. Given AppFolio’s stronger consensus rating and higher probable upside, analysts clearly believe AppFolio is more favorable than Paycom Software.

Summary

Paycom Software beats AppFolio on 8 of the 14 factors compared between the two stocks.

About Paycom Software

Paycom Software, Inc. provides cloud-based human capital management (HCM) solution delivered as software-as-a-service for small to mid-sized companies in the United States. It offers functionality and data analytics that businesses need to manage the employment life cycle from recruitment to retirement. The company's HCM solution provides a suite of applications in the areas of talent acquisition, including applicant tracking, candidate tracker, background checks, on-boarding, e-verify, and tax credit services; and time and labor management, such as time and attendance, scheduling, time-off requests, labor allocation, labor management reports/push reporting, geofencing/geotracking, and Microfence, a proprietary Bluetooth. Its HCM solution also offers payroll applications comprising better employee transaction interface, payroll and tax management, payroll card, Everyday, Paycom pay, Client Action Center, expense management, mileage tracker/fixed and variable rates, garnishment administration, and GL concierge applications; and talent management applications that include employee self-service, compensation budgeting, performance management, position management, and Paycom learning, as well as my analytics. In addition, its HCM solution provides manager on-the-go that gives supervisors and managers the ability to perform a variety of tasks, such as approving time-off requests and expense reimbursements; direct data exchange; ask here, a tool for direct line of communication to ask work-related questions; document and checklist; government and compliance; benefits administration/benefits to carrier; benefit enrollment service; COBRA administration; personnel action and performance discussion forms; surveys; 401(k) reporting; report center; and affordable care act applications, as well as Clue, which securely collects, tracks, and manages the vaccination and testing data of the workforce. Paycom Software, Inc. was founded in 1998 and is based in Oklahoma City, Oklahoma.

About AppFolio

AppFolio, Inc., together with its subsidiaries, provides cloud business management solutions for the real estate industry in the United States. The company provides a cloud-based platform that enables users to automate and optimize common workflows; tools that assist with leasing, maintenance, and accounting; and other technology and services offered by third parties. It offers AppFolio Property Manager Core, a platform that provides the basic functionalities required to operate a property management business, as well as serves as a system of record; AppFolio Property Manager Plus, which offers housing management, student housing management, complex accounting, leasing insights, large-scale operations support, role-based permissions, stack integrations, and enhanced customer support services; AppFolio Property Manager Max offers customer relationship management functionality, field customization, customer database functionality, and customer success management services; and AppFolio Investment Manager, a software that provides investment management, asset management, and relationship management solutions. The company also provides value-added services that are designed to enhance, automate, and streamline processes and workflows for property management businesses, such as electronic payment, tenant screening, and insurance services. AppFolio, Inc. was incorporated in 2006 and is headquartered in Santa Barbara, California.