The software industry's promising prospects are driven by rising spending on public cloud services and businesses prioritizing scalable cloud solutions, blockchain, AI, and low-code development. Moreover, emerging trends like the Internet of Behavior, Total Experience, edge computing, AR/VR, and DevOps also shape the industry's future.
Amid this backdrop, investors could consider buying quality software stocks Oracle Corporation (ORCL), ZoomInfo Technologies Inc. (ZI), Amdocs Limited (DOX), and Creative Realities, Inc. (CREX) for solid gains this June.
Business software applications are popular for boosting productivity, improving customer management, analyzing data, and streamlining processes. The software industry thrives by focusing on advanced solutions, embracing automation, cybersecurity, data analytics, and digitization for improved efficiency and insights. The global business software market is expected to grow at a CAGR of 11.9% until 2030.
Consequently, increasing investments in mobile apps, especially in mobile gaming, daily utilities, unified solutions, innovative monetization methods, and expanded internet access are driving further growth in the software industry. Gartner forecasts an 8% increase in global IT spending to $5.06 trillion in 2024, with software spending expected to rise by 13.9% to $1.04 trillion.
Additionally, the software market is projected to grow at a 5.3% CAGR from 2024 to 2028. Investors’ interest in software stocks is evident from the iShares Expanded Tech-Software Sector ETF’s (IGV) 34.4% returns over the past year.
Considering these conducive trends, let’s analyze the fundamental aspects of the four software picks mentioned above.
Oracle Corporation (ORCL)
ORCL offers products and services that address enterprise information technology environments worldwide. The company provides cloud software applications, cloud-based industry solutions, application licenses, infrastructure technologies, databases, Java, middleware, hardware products, and consulting and customer services.
In terms of the trailing-12-month levered FCF margin, ORCL’s 23.01% is 129.6% higher than the 10.02% industry average. Likewise, the stock’s 29.15% trailing-12-month EBIT margin is 515% higher than the 4.74% industry average. Also, the stock’s 20.27% trailing-12-month net income margin is 662.1% higher than the 2.66% industry average.
For the fiscal third quarter that ended February 29, 2024, ORCL’s total revenues increased 7.1% year-over-year to $13.28 billion. Its non-GAAP operating income rose 11.7% from the year-ago value to $5.79 billion. Also, the company’s non-GAAP net income and non-GAAP EPS rose 17.7% and 15.6% over the prior-year quarter to $3.98 billion and $1.41, respectively.
Analysts expect ORCL’s revenue for the quarter ending May 31, 2024, to increase 5.3% year-over-year to $14.57 billion, and its EPS for the quarter ending August 31, 2024, is expected to increase 11.3% year-over-year to $1.32. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 26.8% to close the last trading session at $124.68.
ORCL’s POWR Ratings reflect strong prospects. It has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Stability, Sentiment, and Quality. It is ranked #37 out of 137 stocks in the Software - Application industry. Beyond what we stated above, we also have given ORCL grades for Growth, Value, and Momentum. Get all the ORCL’s ratings here.
ZoomInfo Technologies Inc. (ZI)
ZI and its subsidiaries provide a go-to-market intelligence and engagement platform for sales and marketing teams in the United States and internationally. The company's cloud-based platform helps users identify target customers, obtain predictive lead and company scoring, and engage with automated sales tools to track progress through the deal cycle.
On May 22, 2024, ZI announced the release of ZoomInfo Copilot, an AI-powered platform that enhances sales performance by predicting pipelines and doubling sales opportunities. The platform integrates AI with high-quality B2B data to provide actionable insights and automated tools for sales and marketing teams. By leveraging AI technology and accurate B2B data, sales teams can make informed decisions and streamline their processes for better results.
In terms of the trailing-12-month EBITDA margin, ZI’s 23.08% is 23.3% higher than the 18.72% industry average. Likewise, its 6.24% trailing-12-month net income margin is 112.5% higher than the 2.94% industry average. Furthermore, the stock’s 4.41% trailing-12-month Return on Total Capital is 24.6% higher than the 3.54% industry average.
ZI’s revenue for the fiscal first quarter ended March 31, 2024, increased 3.1% year-over-year to $310.10 million. Likewise, the company’s adjusted net income and adjusted net income per share came in at $100.50 million and $0.26, up 1% and 8.3% over the previous year’s quarter, respectively. In addition, ZI’s unlevered free cash flow grew 1.3% year-over-year to $122.70 million.
For the quarter ending September 30, 2024, ZI’s revenue is expected to increase 1.1% year-over-year to $317.23 million. Its EPS for the quarter ending December 31, 2024, is expected to increase marginally year-over-year to $1.01. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past six months, the stock has declined 8.6% to close the last trading session at $12.95.
ZI has a B grade for Value, and Quality. It is ranked #42 in the Software – Application industry. To see ZI’s Growth, Momentum, Stability, and Sentiment ratings, click here.
Amdocs Limited (DOX)
DOX provides software and services worldwide. It designs, develops, operates, implements, supports, and markets open and modular cloud portfolios.
On May 8, 2024, DOX announced that its subsidiary, Vubiquity, had been selected by Paramount Global to manage all operational activities and affiliate management for MTV Japan under a new licensing agreement. The transition, set to conclude by the end of June 2024, includes content acquisition, programming, localization, and broadcast operations. This partnership will allow Vubiquity to further expand its presence in the Asian market and solidify its reputation as a leading provider of content management solutions.
On the same date, DOX announced that Virgin Media O2 is collaborating with DOX to expand its range of streaming, gaming, health, lifestyle, and security services. This partnership will enable Virgin Media O2 customers to manage all their subscriptions seamlessly in one place across TV, mobile, and PC. This collaboration aims to enhance the overall customer experience by providing a convenient and integrated platform for accessing a variety of services.
In terms of the trailing-12-month Return on Common Equity, DOX’s 14.81% is 279.2% higher than the 3.90% industry average. Likewise, its 10.50% trailing-12-month Return on Total Capital is 299.2% higher than the 2.63% industry average. Moreover, its 0.77x trailing-12-month asset turnover ratio is 25.9% higher than the 0.61x industry average.
In the second quarter that ended March 31, 2024, DOX’s revenue grew 2.5% year-over-year to $1.25 billion. The company’s non-GAAP operating income and net income rose 5.4% and 2.4% over the prior-year quarter to $229.43 million and $183.62 million, respectively. Furthermore, its non-GAAP EPS rose 6.1% from the year-ago value to $1.56.
Street expects DOX’s EPS and revenue for the quarter ending June 30, 2024, to increase 3.1% and 1.7% year-over-year to $1.62 and $1.26 billion, respectively. Over the past six months, the stock has declined 4.5% to close the last trading session at $79.34.
It’s no surprise that DOX has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system.
It is ranked #13 out of 44 stocks in the Software - Business industry. It has a B grade for Stability, and Quality. Click here to see DOX’s rating for Growth, Value, Momentum, and Sentiment.
Creative Realities, Inc. (CREX)
CREX and its subsidiaries provide digital marketing technology and solutions in the United States and internationally. It offers digital signage and media solutions to enhance communications in a wide range of out-of-home environments.
On May 15, 2024, CREX announced its expansion into the EMEA region with a beta launch for EMEA integrators in 2024 and will offer deployment services to these integrators in North America.
The company aims to appeal to EMEA digital signage integrators with its enterprise-level CMS platforms tailored for retail, convenience stores, and food service segments.
On March 13, 2024, CREX partnered with Departure Media Airport Advertising to enhance the traveler experience at CVG with captivating displays combining LED and static signage, elevating airport advertising standards and creating engaging revenue-generating spaces.
This collaboration integrates upgraded technology, strategic placement, and the ReflectView CMS platform to transform the airport landscape and offer advertisers innovative and impactful platforms.
In terms of the trailing-12-month levered FCF margin, CREX’s 21.65% is 169.6% higher than the 8.03% industry average. Similarly, its 0.71x trailing-12-month net income margin is 45.6% higher than the 0.49x industry average.
CREX’s total sales for the first quarter that ended March 31, 2024, increased 23.5% year-over-year to $12.29 million, and its service and other sales rose 44.8% from the same period last year to $8.14 million.
For the same period, its gross profit rose 13.3% from the year-ago value to $5.76 million. In addition, as of March 31, 2024, CREX’s total liabilities amounted to $39.36 million, compared to $41.95 million as of December 31, 2023.
For the quarter ending June 30, 2024, CREX’s revenue is expected to increase 46.3% year-over-year to $13.45 million. Its EPS for fiscal 2025 is expected to grow 118.5% year-over-year to $0.30. Over the past nine months, the stock has gained 89.3% to close the last trading session at $3.54.
CREX has a B grade for Sentiment. It is ranked #44 in the Software – Application industry. To access the additional ratings of CREX for Growth, Value, Momentum, Stability, and Quality, click here.
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ORCL shares were trading at $124.13 per share on Tuesday afternoon, up $1.22 (+0.99%). Year-to-date, ORCL has gained 18.57%, versus a 11.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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