Why Paycom Software Climbed 17% in October

What happened

Shares of Paycom Software (NYSE:PAYC) gained 17% in October, according to data from S&P Global Market Intelligence. The stock saw positive momentum stemming from encouraging employment data and positive coverage from analysts. 

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Challenges created by the coronavirus pandemic have made it more difficult for many enterprise software companies to add new customers, but October arrived with data on employment trends suggesting the outlook may be improving for businesses in the space. 

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Image source: Getty Images.

So what

The Labor Department published jobs numbers on Oct. 2, showing that non-farm jobs increased 661,000, or 7.9%, in September. The additions came in below the addition of 800,000 jobs forecast by economists polled by Dow Jones, but there were still some significant trends in the economic data. Following the data release early in the month, Paycom Software enjoyed a string of favorable coverage from analysts. 

Stifel analyst Brad Reback published a note on Paycom stock on Oct. 2, upgrading his one-year price target on the stock from $250 to $365 per share. Barclays analysts then published a note on Oct. 11, raising the firm’s price target on Paycom from $277 to $350. Alex Zukin of RBC Capital then published a note on Oct. 21, hiking his price target from $305 to $450 per share and raising his rating on the stock from a “sector perform” to an “outperform” rating.

Now what

Paycom software have gained ground amid momentum for the broader market in November. The company’s shares have climbed roughly 7.7% in the month so far. 

PAYC Chart

PAYC data by YCharts

Paycom published its third quarter results after the market closed on Nov. 4. Sales for the period rose 12.3% year over year to reach 196.53 million, and non-GAAP (adjusted) net income for the period hit $0.70 per share. The average analyst estimate had called for revenue of $192.38 million and adjusted earnings of $0.56 per share. For the fourth quarter, management is guiding for revenue between $212 million and adjusted EBITDA between $76 million and $78 million. 

Paycom has a market capitalization of roughly $22.4 billion and is valued at 27 times this year’s expected sales and 112 times expected earnings. 

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