The growing adoption of software solutions due to the rising automation of business processes is expected to drive the software industry’s growth. Therefore, quality software stocks GoDaddy Inc. (GDDY), SolarWinds Corporation (SWI), and Agilysys, Inc. (AGYS) could be wise investments now.
Recent years have observed a considerable adoption of software solutions, driven by the increase of e-commerce and digitization of businesses. Moreover, the rising sophistication of malware and attack methods has increased the demand for cybersecurity solutions. The global software market is expected to grow at a CAGR of 11.5% until 2030.
With the growing adoption of cloud infrastructure, Software-as-a-Service (SaaS) is witnessing rapid demand growth. End-user SaaS spending is projected to grow 17.9% to $197 billion this year.
Let’s discuss the feature stocks in detail:
GoDaddy Inc. (GDDY)
GDDY engages in the design and development of cloud-based products in the United States and internationally. It operates through two segments, Applications and Commerce and Core Platform.
GDDY’s trailing-12-month EBITDA margin of 17.42% is 113.9% higher than the 8.14% industry average. Its trailing-12-month net income margin of 8.03% is 306.8% higher than the 1.97% industry average.
GDDY’s total revenue increased 3.3% year-over-year to $1.04 billion in the fiscal first quarter, which ended March 31, 2023. Its net income came in at $47.30 million. Also, its net income attributable to GDDY per share of Class A common stock came in at $0.30, and operating income came in at $70.80 million.
GDDY’s revenue is expected to rise 3.9% year-over-year to $1.05 billion for the fiscal second quarter ending June 2023. The company’s EPS for the same quarter is expected to increase 1.5% year-over-year to $0.57.
The stock has gained 6.7% over the past year to close the last trading session at $73.74.
GDDY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
GDDY also has a B grade for Value and Quality. It is ranked #10 out of 50 stocks in the Software - Business industry.
To access additional ratings for GDDY’s Growth, Stability, Sentiment, and Momentum, click here.
SolarWinds Corporation (SWI)
SWI provides information technology (IT) management software products in the United States and internationally. The company offers a portfolio of solutions to technology professionals for monitoring, managing, and optimizing networks, systems, desktops, applications, storage, databases, website infrastructures, and IT service desks.
On May 30, SWI unveiled a new brand reflecting the company’s recent transformative efforts to evolve its business, expand its product portfolio, and enhance its go-to-market strategy.
On May 16, SWI announced adding transformative artificial intelligence (AI) and machine learning (ML) capabilities to its IT service management (ITSM) solutions. The new AI features include a virtual agent to help users solve everyday IT problems and guided incident resolution to empower agents with the information they need to resolve complex issues effectively.
SWI’s trailing-12-month EBITDA margin of 28.1% is 245.4% higher than the 8.14% industry average. Its trailing-12-month gross profit margin of 90.61% is 84% higher than the 49.24% industry average.
During the fiscal first quarter that ended March 31, 2023, SWI’s total recurring revenue increased 9.5% year-over-year to $168.84 million. Gross profit increased 15.8% year-over-year to $164.15 million, while its adjusted EBITDA increased 12.5% year-over-year to $77.37 million.
SWI’s revenue is expected to increase 1.8% year-over-year to $179.12 million for the fiscal second quarter ending June 2023. Its EPS is expected to be $0.17 for the same quarter. Moreover, SWI topped consensus revenue and EPS estimates in three of the trailing four quarters, which is impressive.
Shares of SWI have gained 28.2% over the past nine months to close the last trading session at $10.14.
SWI’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Growth, Value, and Sentiment. It is ranked #9 in the same industry.
Beyond what is stated above, we’ve also rated for Quality, Stability, and Momentum. Get all SWI ratings here.
Agilysys, Inc. (AGYS)
AGYS operates as a developer and marketer of hardware and software products and services to the hospitality industry in North America, Europe, the Asia-Pacific, and India. It offers a point of sale, property management systems, inventory and procurement, payments, activity scheduling, reservations management, and related solutions to enhance the guest experience.
AGYS’ trailing-12-month EBITDA margin of 8.25% is 1.3% higher than the 8.14% industry average. Its trailing-12-month gross profit margin of 61% is 23.9% higher than the 49.24% industry average.
AGYS’ total net revenue increased 13.6% year-over-year to $52.90 million during the fourth quarter that ended March 31, 2023. Net income increased 105.6% year-over-year to $4.08 million, and net income per share increased 133.3% year-over-year to $0.14.
Street expects AGYS’ revenue for the fiscal first quarter ending June 2023 to come in at $55.24 million, indicating a 16.3% year-over-year growth. Its EPS is expected to be $0.14 for the same quarter. Also, it has surpassed revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 47.6% over the past year to close the last trading session at $63.77.
It is no surprise that AGYS has an overall rating of B, which equates to a Buy in our POWR Ratings system.
AGYS is graded an A in Sentiment and Quality and a B in Momentum. It is ranked #8 in the Software - Business industry.
In addition to the grades stated above, AGYS’ grades for Stability, Growth, and Value can be seen here.
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GDDY shares were trading at $74.02 per share on Thursday morning, up $0.28 (+0.38%). Year-to-date, GDDY has declined -1.07%, versus a 15.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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