Contrasting Paycom Software (NYSE:PAYC) and Dropbox (NASDAQ:DBX)

Paycom Software (NYSE:PAYC) and Dropbox (NASDAQ:DBX) are both technology companies, but which is the better business? We will compare the two companies based on the strength of their dividends, analyst recommendations, profitability, earnings, risk, institutional ownership and valuation.

Institutional and Insider Ownership

87.8% of Paycom Software shares are held by institutional investors. Comparatively, 94.8% of Dropbox shares are held by institutional investors. 13.2% of Paycom Software shares are held by company insiders. Comparatively, 35.5% of Dropbox 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.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Paycom Software	22.78%	37.06%	8.17%
Dropbox	17.49%	-24.26%	15.88%

Analyst Ratings

This is a summary of recent ratings and target prices for Paycom Software and Dropbox, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Paycom Software	1	10	5	0	2.25
Dropbox	3	4	1	0	1.75

Paycom Software currently has a consensus price target of $225.14, suggesting a potential downside of 18.02%. Dropbox has a consensus price target of $29.75, suggesting a potential downside of 21.36%. Given Paycom Software’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Paycom Software is more favorable than Dropbox.

Risk and Volatility

Paycom Software has a beta of 0.82, suggesting that its stock price is 18% less volatile than the S&P 500. Comparatively, Dropbox has a beta of 0.63, suggesting that its stock price is 37% less volatile than the S&P 500.

Earnings and Valuation

This table compares Paycom Software and Dropbox”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Paycom Software	$2.05 billion	6.03	$453.40 million	$9.41	29.19
Dropbox	$2.52 billion	3.39	$508.40 million	$1.80	21.02

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

Summary

Paycom Software beats Dropbox on 9 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 Dropbox

Dropbox, Inc. provides a content collaboration platform worldwide. The company's platform allows individuals, families, teams, and organizations to collaborate and sign up for free through its website or app, as well as upgrade to a paid subscription plan for premium features. It serves customers in professional services, technology, media, education, industrial, consumer and retail, and financial services industries. The company was formerly known as Evenflow, Inc. and changed its name to Dropbox, Inc. in October 2009. Dropbox, Inc. was incorporated in 2007 and is headquartered in San Francisco, California.