This year, the software industry is set for robust growth and expansion thanks to enterprises prioritizing investments in software-driven transformations to improve productivity and automation. Given the industry’s bright prospects, it could be wise to invest in fundamentally strong software stocks Commvault Systems, Inc. (CVLT), IBEX Limited (IBEX), and eGain Corporation (EGAN) for solid returns. Let’s discuss this in detail.
The software industry is expected to witness significant growth in the foreseeable future, driven by the increased automation of business processes across end-use industries, including retail, healthcare, manufacturing, and transportation. Businesses are increasingly adopting emerging technologies to automate their operations effectively.
Moreover, the industry is experiencing a significant expansion with the growing popularity of Artificial Intelligence (AI), catalyzed by the launch of OpenAI's ChatGPT in November 2022. Software companies are swiftly responding to this trend by bolstering their product portfolios with novel generative AI capabilities.
Based on the latest forecast by Gartner Inc. (IT), software spending is expected to grow 12.3% year-over-year in 2023. This year, the software segment will likely witness significant growth as businesses prioritize their spending to gain competitive advantages through automation, increased productivity, and other software-driven transformation initiatives.
According to The Business Research Company, the software products market is expected to reach $2.36 trillion by 2027, growing at a 12% CAGR. Investors’ interest in software stocks is evident from the Direxion Daily S&P Expanded Tech Software Sector Bull 2X Shares’ 37.7% gain over the past six months.
Given the industry’s growth prospects, top software stocks CVLT, IBEX, and EGAN could be ideal buys this month to garner significant gains.
Commvault Systems, Inc. (CVLT)
CVLT is a global data management company that offers enterprise-level, intelligent data services through a unified code base and single platform in the United States ad internationally. The company sells its products and services directly through its sales force and indirectly through its network of distributors, value-added resellers, and original equipment manufacturers.
CVLT’s trailing-12-month gross profit margin of 83.15% is 65% higher than the 50.39% industry average. Likewise, the stock’s trailing-12-month levered FCF margin of 24.41% is 272.8% higher than the 6.55% industry average.
CVLT’s revenue from services increased 1.6% year-over-year to $105.49 million during the fiscal 2023 third quarter (ended December 31, 2022). Its interest income rose 203.3% year-over-year to $364 million. As of December 31, 2022, the company’s total current assets stood at $506.68 million, compared to $484.08 million as of March 31, 2022.
The consensus revenue estimate of $807.37 million for the fiscal year (ending March 2024) reflects a 3.8% year-over-year improvement. Likewise, the consensus EPS estimate of $2.63 for the same year indicates a 6.5% rise year-over-year. Moreover, the company surpassed its consensus revenue and EPS estimates in three of the trailing four quarters.
The stock has gained 11.5% over the past month to close the last trading session at $61.43.
CVLT’s strong fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
CVLT has an A grade for Quality and a B for Growth and Value. It is ranked #2 in the 132-stock Software - Application industry.
In addition to the POWR Ratings I’ve just highlighted, you can see CVLT’s ratings for Stability, Sentiment, and Momentum here.
IBEX Limited (IBEX)
IBEX offers technology-enabled solutions for customer lifecycle experiences. Its portfolio includes ibex Connect, providing outsourced back-office services through a CX model; ibex Digital for customer acquisition solutions; and ibex CX, offering proprietary software tools for managing the customer experience.
On March 9, IBEX announced its partnership with Krisp to use its cutting-edge AI-powered noise cancellation software for IBEX’s onsite and remote agents to provide a better client experience. With Krisp, IBEX would once more set the bar for producing incredible customer experiences for the biggest brands in the world.
IBEX’s trailing-12-month levered FCF margin of 7.35% is 67.6% higher than the 4.39% industry average. Moreover, the stock’s trailing-12-month asset turnover ratio of 1.76x compares to the 0.80x industry average.
For the fiscal 2023 second quarter that ended December 31, 2022, IBEX’s revenue increased 5.5% year-over-year to $139.39 million. Its adjusted EBITDA rose 40.5% from the year-ago value to $25.06 million. Furthermore, the company’s adjusted net income and adjusted EPS grew 126.9% and 129.6% year-over-year to $11.74 million and $0.62, respectively.
Analysts expect IBEX’s revenue to increase 11% year-over-year to $547.80 million for the fiscal year ending June 2023. Similarly, the company’s EPS for the ongoing year is expected to grow 29.5% from the previous year to $1.75. Also, the company topped its consensus EPS estimates in all four trailing quarters, which is impressive.
Shares of IBEX have gained 32.2% over the past six months and 50.5% over the past year to close the last trading session at $23.80.
IBEX’s solid outlook is apparent in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
IBEX has an A grade for Sentiment and a B for Growth and Value. Within the same industry, it is ranked #3 out of 132 stocks.
Click here to access additional IBEX ratings for Quality, Stability, and Momentum.
eGain Corporation (EGAN)
EGAN is a software solutions provider for customer service infrastructure. Its unified Knowledge Hub solutions automate and orchestrate customer engagement, while subscription services offer cloud-based software access. The company also provides professional services like consulting, implementation, training, and managed services.
On February 15, EGAN announced that it had integrated its eGain Knowledge Hub solution with Microsoft Teams™ using a Bring Your Own (BYO) architecture that allows easy deployment without code. This development would expand EGAN’s potential customer base and improve the customer experience.
In the fiscal 2023 second quarter that ended December 31, 2022, EGAN’s revenue increased 10.9% year-over-year to $25.60 million, while its gross profit grew 10.9% year-over-year to $18.85 million. Also, the company’s income from operations came in at $213 million, compared to a loss from operations of $630 million in the prior year’s period.
In addition, as of December 31, 2022, EGAN’s cash and cash equivalents stood at $80.87 million, compared to $72.17 million as of June 30, 2022.
Analysts expect EGAN’s revenue to grow 12.8% year-over-year to $111.29 million for the fiscal year ending June 2024. The company’s EPS for the same year is expected to increase by 114.3% year-over-year to $0.38. Furthermore, the company surpassed the consensus revenue estimates in all four trailing quarters.
The stock has gained 2.1% over the past five days to close the last trading session at $7.46.
EGAN’s POWR Ratings reflect its promising prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Sentiment and a B for Value, Stability, and Quality. It has topped the 132-stock Software - Application industry.
To see additional POWR Ratings for Growth and Momentum for EGAN, click here.
Consider This Before Placing Your Next Trade…
We are still in the midst of a bear market.
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CVLT shares were trading at $61.15 per share on Friday afternoon, down $0.28 (-0.46%). Year-to-date, CVLT has declined -2.69%, versus a 7.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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