In the fast-evolving software industry, Paycom Software, Inc. (PAYC) and SoundHound AI, Inc. (SOUN) represent two dynamic players with distinct yet overlapping innovation strategies. Paycom focuses on cloud-based human capital management, while SoundHound pioneers voice AI platforms. Both companies harness cutting-edge technology to transform business operations. This article will analyze their strengths and risks to help you decide which stock might be the smarter addition to your investment portfolio.
Table of contents
Companies Overview
I will begin the comparison between Paycom Software, Inc. and SoundHound AI, Inc. by providing an overview of these two companies and their main differences.
Paycom Software, Inc. Overview
Paycom Software, Inc. delivers cloud-based human capital management (HCM) solutions as software-as-a-service to small and mid-sized U.S. companies. Its comprehensive platform covers recruitment, payroll, time and labor management, talent management, and compliance functions. Founded in 1998 and headquartered in Oklahoma City, Paycom supports employers in managing the entire employment lifecycle with extensive analytics and mobile capabilities.
SoundHound AI, Inc. Overview
SoundHound AI, Inc. develops an independent voice artificial intelligence platform designed to enable businesses to create conversational voice assistants. Its Houndify platform includes tools like speech recognition, natural language understanding, and text-to-speech to deliver interactive customer experiences. Established in Santa Clara, California, the company focuses on AI-driven voice solutions across various industries.
Key similarities and differences
Both companies operate in the technology sector within the software application industry, providing innovative SaaS solutions to enhance business operations. Paycom emphasizes human capital management for workforce administration, while SoundHound specializes in voice AI technologies for conversational interfaces. Their business models differ in target markets and product focus, with Paycom serving HR needs and SoundHound addressing voice interaction capabilities.
Income Statement Comparison
The table below presents a side-by-side comparison of the key income statement metrics for Paycom Software, Inc. and SoundHound AI, Inc. for the fiscal year 2024.
| Metric | Paycom Software, Inc. | SoundHound AI, Inc. |
|---|---|---|
| Market Cap | 8.35B | 4.66B |
| Revenue | 1.88B | 85M |
| EBITDA | 798M | -329M |
| EBIT | 652M | -348M |
| Net Income | 502M | -351M |
| EPS | 8.93 | -1.04 |
| Fiscal Year | 2024 | 2024 |
Income Statement Interpretations
Paycom Software, Inc.
From 2020 to 2024, Paycom’s revenue rose steadily from $841M to $1.88B, with net income increasing from $143M to $502M. Margins remained strong and improved, with a gross margin of 82.23% and net margin at 26.66% in 2024. The latest year showed favorable growth in revenue and net income, alongside expanding margins and a 51.7% EPS increase.
SoundHound AI, Inc.
SoundHound’s revenue grew impressively from $13M in 2020 to $85M in 2024, but net income remained negative, worsening to a $351M loss in 2024. Gross margin was moderate at 48.86%, but EBIT and net margins were deeply negative at -410.61% and -414.06%, respectively. The recent year saw revenue growth but deteriorated profitability and EPS decline, reflecting ongoing losses.
Which one has the stronger fundamentals?
Paycom demonstrates stronger fundamentals with consistent revenue and net income growth, high profitability, and improving margins, all evaluated favorably. Conversely, SoundHound, despite rapid revenue growth, struggles with large losses and unfavorable margins, leading to an overall unfavorable income statement evaluation. Paycom’s stable profitability contrasts with SoundHound’s persistent negative earnings.
Financial Ratios Comparison
This table presents a side-by-side comparison of key financial ratios for Paycom Software, Inc. (PAYC) and SoundHound AI, Inc. (SOUN) based on their most recent fiscal year 2024 data.
| Ratios | Paycom Software, Inc. (PAYC) | SoundHound AI, Inc. (SOUN) |
|---|---|---|
| ROE | 31.9% | -191.9% |
| ROIC | 24.9% | -68.1% |
| P/E | 22.9 | -19.1 |
| P/B | 7.31 | 36.8 |
| Current Ratio | 1.10 | 3.77 |
| Quick Ratio | 1.10 | 3.77 |
| D/E (Debt-to-Equity) | 5.3% | 2.4% |
| Debt-to-Assets | 1.42% | 0.79% |
| Interest Coverage | 186.6 | -28.1 |
| Asset Turnover | 0.32 | 0.15 |
| Fixed Asset Turnover | 2.93 | 14.28 |
| Payout ratio | 16.9% | 0% |
| Dividend yield | 0.74% | 0% |
Interpretation of the Ratios
Paycom Software, Inc.
Paycom exhibits mostly favorable financial ratios, including a strong net margin of 26.66% and a high return on equity at 31.85%. Its debt levels and interest coverage are also favorable, though the price-to-book ratio and asset turnover raise some concerns. The company pays dividends, with a modest yield of 0.74%, supported by free cash flow, indicating sustainable shareholder returns but limited yield attractiveness.
SoundHound AI, Inc.
SoundHound’s ratios reveal significant weaknesses, including a deeply negative net margin (-414.06%) and return on equity (-191.99%). While the company maintains a low debt level and a strong quick ratio, its high price-to-book ratio and negative interest coverage highlight financial strain. SoundHound does not pay dividends, reflecting its negative net income and ongoing investment in growth and R&D.
Which one has the best ratios?
Based on the evaluations, Paycom Software, Inc. holds the more favorable overall financial ratios, with solid profitability and manageable debt, whereas SoundHound AI, Inc. faces multiple unfavorable metrics indicating high risk and operational challenges. Paycom’s dividend and return metrics further contrast with SoundHound’s lack of distributions.
Strategic Positioning
This section compares the strategic positioning of Paycom Software, Inc. and SoundHound AI, Inc., focusing on market position, key segments, and exposure to technological disruption:
Paycom Software, Inc.
- Leading cloud-based HCM provider in the US with stable competition
- Focus on human capital management SaaS for small to mid-sized companies
- Moderate exposure through proprietary Bluetooth tech and software innovation
SoundHound AI, Inc.
- Voice AI platform developer with higher volatility and emerging market
- Focus on conversational voice AI tools including speech recognition, NLU, and text-to-speech
- High exposure due to reliance on fast-evolving artificial intelligence technologies
Paycom vs SoundHound Positioning
Paycom pursues a concentrated strategy in human capital management software with strong recurring revenues, while SoundHound targets diverse AI-driven voice solutions. Paycom benefits from scale and mature offerings; SoundHound faces higher risk but potential growth in AI markets.
Which has the best competitive advantage?
Paycom demonstrates a very favorable moat with ROIC well above WACC and growing profitability, indicating durable competitive advantage. SoundHound shows a slightly unfavorable moat with value destruction despite improving ROIC trends.
Stock Comparison
The past year has seen divergent stock price movements for Paycom Software, Inc. and SoundHound AI, Inc., with Paycom experiencing a notable decline and SoundHound showing significant gains despite recent downward pressure.
Trend Analysis
Paycom Software, Inc. (PAYC) exhibited a bearish trend over the past 12 months, with a price decline of -19.64%. The trend shows deceleration, a high price of 265.71, a low of 141.96, and elevated volatility (std deviation 31.92). Recent months confirm continued weakness.
SoundHound AI, Inc. (SOUN) posted a strong bullish trend over the same period, gaining 183.16%. Despite a deceleration in momentum and a recent price drop of -37%, it maintained low volatility (std deviation 4.66), with prices ranging between 3.55 and 23.95.
Comparing both, SoundHound AI, Inc. delivered the highest market performance over the past year, significantly outperforming Paycom Software, Inc. despite recent corrections.
Target Prices
Analysts present a clear consensus on target prices for Paycom Software, Inc. and SoundHound AI, Inc.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| Paycom Software, Inc. | 290 | 165 | 215 |
| SoundHound AI, Inc. | 15 | 11 | 13.33 |
The consensus target prices for both companies indicate upside potential compared to their current market prices—Paycom at $148.41 and SoundHound at $11.10—reflecting generally optimistic analyst expectations.
Analyst Opinions Comparison
This section compares analysts’ ratings and grades for Paycom Software, Inc. and SoundHound AI, Inc.:
Rating Comparison
PAYC Rating
- Rating: A, indicating a very favorable overall assessment.
- Discounted Cash Flow Score: 5, very favorable for valuation.
- ROE Score: 5, showing very efficient profit generation.
- ROA Score: 5, very effective asset utilization.
- Debt To Equity Score: 4, favorable financial risk profile.
- Overall Score: 4, favorable financial standing.
SOUN Rating
- Rating: C-, indicating a very unfavorable overall assessment.
- Discounted Cash Flow Score: 1, very unfavorable for valuation.
- ROE Score: 1, showing very poor profit generation.
- ROA Score: 1, very ineffective asset utilization.
- Debt To Equity Score: 4, favorable financial risk profile.
- Overall Score: 1, very unfavorable financial standing.
Which one is the best rated?
Based strictly on the provided data, Paycom Software, Inc. is better rated with higher scores across discounted cash flow, profitability metrics, and overall financial health. SoundHound AI, Inc. has significantly lower scores except for debt-to-equity, where both are equal.
Scores Comparison
The comparison of Paycom Software and SoundHound AI scores is as follows:
PAYC Scores
- Altman Z-Score: 3.84, indicating a safe zone with low bankruptcy risk.
- Piotroski Score: 5, representing an average financial strength.
SOUN Scores
- Altman Z-Score: 6.62, indicating a safe zone with very low bankruptcy risk.
- Piotroski Score: 3, indicating very weak financial strength.
Which company has the best scores?
Based on the provided data, SoundHound AI has a higher Altman Z-Score, suggesting stronger bankruptcy safety, while Paycom Software has a better Piotroski Score, indicating stronger financial health. Each company leads in a different score category.
Grades Comparison
Here is a comparison of the latest grades from reputable grading companies for Paycom Software, Inc. and SoundHound AI, Inc.:
Paycom Software, Inc. Grades
This table summarizes recent grade actions from leading financial institutions for Paycom Software, Inc.:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Barclays | Maintain | Equal Weight | 2026-01-12 |
| TD Cowen | Maintain | Buy | 2026-01-08 |
| Citigroup | Maintain | Neutral | 2025-12-23 |
| Keybanc | Maintain | Overweight | 2025-11-06 |
| TD Cowen | Maintain | Buy | 2025-11-06 |
| UBS | Maintain | Buy | 2025-11-06 |
| Jefferies | Maintain | Hold | 2025-11-06 |
| JP Morgan | Maintain | Neutral | 2025-11-06 |
| Mizuho | Maintain | Neutral | 2025-11-06 |
| Barclays | Maintain | Equal Weight | 2025-11-06 |
The overall trend for Paycom Software shows a mix of Buy, Hold, and Neutral grades, indicating a cautious but moderately positive outlook.
SoundHound AI, Inc. Grades
This table presents recent grade updates from credible financial analysts for SoundHound AI, Inc.:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Piper Sandler | Maintain | Neutral | 2026-01-05 |
| Cantor Fitzgerald | Upgrade | Overweight | 2025-12-12 |
| DA Davidson | Maintain | Buy | 2025-11-18 |
| Piper Sandler | Maintain | Neutral | 2025-11-07 |
| HC Wainwright & Co. | Maintain | Buy | 2025-10-16 |
| HC Wainwright & Co. | Maintain | Buy | 2025-09-17 |
| Wedbush | Maintain | Outperform | 2025-09-11 |
| DA Davidson | Maintain | Buy | 2025-09-10 |
| Ladenburg Thalmann | Upgrade | Buy | 2025-08-11 |
| Wedbush | Maintain | Outperform | 2025-08-08 |
SoundHound AI shows predominantly Buy and Outperform ratings with some upgrades, reflecting a generally bullish sentiment.
Which company has the best grades?
SoundHound AI, Inc. has received a higher proportion of Buy and Outperform grades compared to Paycom Software, Inc., which has a more mixed rating profile. This difference may influence investors’ perceptions of growth potential and risk profiles for each company.
Strengths and Weaknesses
Below is a comparison table highlighting the key strengths and weaknesses of Paycom Software, Inc. (PAYC) and SoundHound AI, Inc. (SOUN) based on their latest financial and operational data.
| Criterion | Paycom Software, Inc. (PAYC) | SoundHound AI, Inc. (SOUN) |
|---|---|---|
| Diversification | Moderate, largely recurring revenue (1.73B USD in 2024) with some implementation services | More diversified revenue streams: hosted services (57M), licensing (18M), and professional services (9M) in 2024 |
| Profitability | High profitability: net margin 26.7%, ROIC 24.9%, ROE 31.9% | Negative profitability: net margin -414%, ROIC -68%, ROE -192% but improving ROIC trend |
| Innovation | Strong software platform with durable competitive advantage and growing returns | Innovation in AI voice tech, but currently value-destroying; improving profitability trend signals potential upside |
| Global presence | Established US-focused HR software market leader | Emerging AI company with growing but limited global footprint |
| Market Share | Leading market share in HR and payroll software | Niche player in AI voice recognition, smaller market presence |
Key takeaways: PAYC shows a clear durable competitive advantage with strong profitability and recurring revenue, making it a safer investment. SOUN has potential with innovation and revenue growth but currently struggles with profitability and value creation, implying higher risk for investors.
Risk Analysis
The table below summarizes the key risks associated with Paycom Software, Inc. (PAYC) and SoundHound AI, Inc. (SOUN) based on their latest 2024 data.
| Metric | Paycom Software, Inc. (PAYC) | SoundHound AI, Inc. (SOUN) |
|---|---|---|
| Market Risk | Moderate (Beta 0.82) | High (Beta 2.88) |
| Debt Level | Very Low (D/E 0.05) | Very Low (D/E 0.02) |
| Regulatory Risk | Moderate (Tech sector) | Moderate (AI and voice tech) |
| Operational Risk | Low (Strong profitability) | High (Negative margins) |
| Environmental Risk | Low | Low |
| Geopolitical Risk | Moderate (US based) | Moderate (US based) |
The most significant risks are market volatility for SoundHound due to its high beta and operational risk from sustained losses. Paycom’s risks are more moderate with strong financial health and low debt, but valuation concerns exist due to an unfavorable price-to-book ratio. Investors should weigh SoundHound’s high growth potential against its financial instability.
Which Stock to Choose?
Paycom Software, Inc. (PAYC) exhibits consistent income growth with a 123.81% revenue rise over 2020-2024 and a very favorable global income statement evaluation. Its profitability is strong, reflected in a 31.85% ROE and a 26.66% net margin, supported by low debt and a very favorable rating of A.
SoundHound AI, Inc. (SOUN) shows impressive revenue growth of 550.63% over the same period but suffers from negative profitability and an unfavorable global income statement evaluation. Despite low debt levels, its financial ratios and rating are mostly unfavorable, with a very unfavorable overall score and a C- rating.
Investors prioritizing stability, profitability, and proven value creation might find PAYC more aligned with their profile, while those focusing on high growth potential and willing to tolerate financial volatility could see SOUN as a speculative opportunity given its revenue expansion but unfavorable profitability metrics.
Disclaimer: Investment carries a risk of loss of initial capital. The past performance is not a reliable indicator of future results. Be sure to understand risks before making an investment decision.
Go Further
I encourage you to read the complete analyses of Paycom Software, Inc. and SoundHound AI, Inc. to enhance your investment decisions:
