Analyzing Cloudflare (NYSE:NET) & Paycom Software (NYSE:PAYC)

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

Volatility and Risk

Cloudflare has a beta of 1.15, meaning that its share price is 15% more volatile than the S&P 500. Comparatively, Paycom Software has a beta of 1.17, meaning that its share price is 17% more volatile than the S&P 500.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Cloudflare	$1.30 billion	19.44	-$183.95 million	($0.53)	-139.98
Paycom Software	$1.69 billion	5.86	$340.79 million	$8.21	20.79

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

Analyst Ratings

This is a breakdown of recent recommendations for Cloudflare and Paycom Software, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cloudflare	4	9	10	0	2.26
Paycom Software	0	16	3	0	2.16

Cloudflare presently has a consensus price target of $91.87, suggesting a potential upside of 23.83%. Paycom Software has a consensus price target of $246.31, suggesting a potential upside of 44.31%. Given Paycom Software’s higher probable upside, analysts clearly believe Paycom Software is more favorable than Cloudflare.

Institutional & Insider Ownership

82.7% of Cloudflare shares are held by institutional investors. Comparatively, 87.8% of Paycom Software shares are held by institutional investors. 12.8% of Cloudflare shares are held by company insiders. Comparatively, 14.5% of Paycom Software shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Cloudflare	-13.10%	-12.78%	-3.47%
Paycom Software	26.91%	32.84%	10.93%

Summary

Paycom Software beats Cloudflare on 11 of the 14 factors compared between the two stocks.

About Cloudflare

Cloudflare, Inc. operates as a cloud services provider that delivers a range of services to businesses worldwide. The company provides an integrated cloud-based security solution to secure a range of combination of platforms, including public cloud, private cloud, on-premise, software-as-a-service applications, and IoT devices; and website and application security products comprising web application firewall, bot management, distributed denial of service, API gateways, SSL/TLS encryption, script management, security center, and rate limiting products. It offers website and application performance solutions, including content delivery, load balancing, DNS, agro smart routing, video stream delivery, web optimization, cache reserve, cloudfare waiting room, and cloudfare data localization suite; SASE platform through cloudfare one that provides a cloud-based network-as-a-service; network services which deliver network connectivity, security, and performance, including magic WAN, magic transit, magic firewall, cloudflare network interconnect, and spectrum. In addition, the company provides zero trust services, such as cloudflare access, cloudflare gateway, remote browser isolation, cloud access security broker, cloud email security, and data loss prevention products that protects, inspects, and provides privilege rules to grant access to data and application. Further, it provides developer-based solutions consisting of cloudflare workers, R2 object storage, workers KV, durable objects, cloudfare pages, cloudfare stream, and cloudfare images; and consumer products comprising of 1.1.1.1, a DNS resolver, WARP, a virtual private network, and cloudfare registrar that secures registration and management of domain names. The company serves customers in the technology, healthcare, financial services, consumer and retail, industrial, and non-profit industries, as well as government. Cloudflare, Inc. was incorporated in 2009 and is headquartered in San Francisco, California.

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.