Reviewing Q2 (NYSE:QTWO) and Paycom Software (NYSE:PAYC)

Q2 (NYSE:QTWO) and Paycom Software (NYSE:PAYC) are both technology companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, dividends, analyst recommendations, profitability, valuation, risk and earnings.

Analyst Ratings

This is a breakdown of current ratings and target prices for Q2 and Paycom Software, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Q2	0	4	9	1	2.79
Paycom Software	1	10	5	0	2.25

Q2 currently has a consensus target price of $78.33, suggesting a potential upside of 5.44%. Paycom Software has a consensus target price of $256.21, suggesting a potential downside of 4.54%. Given Q2’s stronger consensus rating and higher probable upside, analysts plainly believe Q2 is more favorable than Paycom Software.

Earnings and Valuation

This table compares Q2 and Paycom Software”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Q2	$794.81 million	5.77	$52.01 million	$1.69	43.96
Paycom Software	$2.05 billion	5.90	$453.40 million	$9.41	28.52

Paycom Software has higher revenue and earnings than Q2. Paycom Software is trading at a lower price-to-earnings ratio than Q2, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

87.8% of Paycom Software shares are held by institutional investors. 0.9% of Q2 shares are held by company insiders. Comparatively, 13.2% of Paycom Software shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares Q2 and Paycom Software’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Q2	12.66%	17.85%	10.22%
Paycom Software	22.78%	37.06%	8.17%

Volatility & Risk

Q2 has a beta of 1.36, indicating that its share price is 36% more volatile than the S&P 500. Comparatively, Paycom Software has a beta of 0.75, indicating that its share price is 25% less volatile than the S&P 500.

Summary

Paycom Software beats Q2 on 8 of the 15 factors compared between the two stocks.

About Q2

Q2 Holdings, Inc. provides cloud-based digital solutions to regional and community financial institutions in the United States. The company offers Digital Banking Platform, an end-to-end digital banking platform supports its financial institution customers in their delivery of unified digital banking services across digital channels. Its digital banking platform solutions, comprising Q2 Consumer Banking, Q2 Small Business and Commercial, Q2mobile Remote Deposit Capture, Q2 Sentinel, Q2 Patrol, Q2 SMART, Q2 Contextual Personal Financial Management, Q2 Goals, Q2 CardSwap, Q2 Gro, Q2 Innovation Studio, Q2 Biller Direct, ClickSWITCH, Sensibill, Centrix Dispute Tracking System, Centrix Payments I.Q. System, and Centrix Exact/Transaction Management System. The company also provides lending solutions, which consists precisionlender solutions, a cloud-based platform, data-driven sales enablement, relationship pricing, and portfolio management solution includes precisionlender platform, premium treasury pricing, data studio, and Andi; and Q2 Cloud Lending solutions, a cloud-based digital lending platform and end-to-end lending solution that allows financial institutions, FinTechs, and Alt-FIs to automate and digitize their lending activities, supporting digital lending applications, scoring, underwriting, servicing, and collections for multiple assets classes comprising Q2 CL portal, originate, loan, marketplace, and collections. In addition, it offers Q2 Innovation Studio, an application program interface, or API, based and software development kit, or SDK, based open technology platform; and Helix, a cloud-native, real-time core processing platform. The company was formerly known as CBG Holdings, Inc. and changed its name to Q2 Holdings, Inc. in March 2013. Q2 Holdings, Inc. was founded in 2004 and is headquartered in Austin, Texas.

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.