3 Popular Software Stocks Analyzed for Future Gains

NASDAQ: INTU | Intuit Inc. News, Ratings, and Charts

INTU – The software industry’s growth prospects look promising thanks to continued digitalization initiatives, growing investment, and the integration of emerging technologies. With that in mind, let us delve into the analysis of fundamentally sound software stocks Intuit (INTU), RingCentral (RNG), and Docebo (DCBO) for solid future gains. Read on…

The software industry thrives on increasing digitization and widespread data usage across industries, with the growing adoption of public cloud services further boosting its prospects. So, investors could consider quality software stocks Intuit Inc. (INTU), RingCentral, Inc. (RNG), and Docebo Inc. (DCBO) for impressive gains.

The increasing digitization of various industries has fueled demand for software solutions across sectors such as healthcare, finance, retail, and manufacturing. Companies are increasingly reliant on software to improve efficiency, enhance customer experiences, and drive innovation.

Gartner predicts that spending on software is projected to rise 12.7% year-over-year to $1.03 trillion in 2024.

Moreover, the ongoing shift to remote work and the adoption of cloud-based services have further boosted the demand for software solutions. The COVID-19 pandemic accelerated digital transformation efforts, leading to greater reliance on cloud computing, collaboration tools, cybersecurity solutions, and other software services.

The global business software and services market is expected to expand at a CAGR of 11.9% until 2030.

Furthermore, advancements in artificial intelligence, machine learning, and data analytics have opened up new growth avenues for the software sector. These technologies enable businesses to derive valuable insights from vast amounts of data, driving efficiency improvements and competitive advantages.

The global artificial intelligence market is projected to expand at a CAGR of 37.3% from 2023 to 2030.

On top of it, the robust performance of the iShares Expanded Tech-Software Sector ETF (IGV) reflects investors’ confidence in the growth prospects of software stocks amid ongoing technological advancements and evolving business needs. The ETF has returned 48% over the past year.

In light of these encouraging trends, let’s look at the fundamentals of the three best software stocks.

Intuit Inc. (INTU)

INTU provides financial management and compliance products and services for consumers, small businesses, self-employed, and accounting professionals in the United States, Canada, and internationally. The company operates in four segments: Small Business & Self-Employed; Consumer; Credit Karma; and ProTax.

INTU’s 17.53% trailing-12-month net income margin is 689.3% higher than the 2.22% industry average. The stock’s 22.86% trailing-12-month EBIT margin is 366.5% higher than the 4.70% industry average.

The dividend pays an annual dividend of $3.60, which pays 0.56% on the current market price. Its four-year average dividend yield is 0.61%.

INTU’s net revenues for the first quarter ended October 31, 2023, increased 14.7% year-over-year to $2.98 billion. Its non-GAAP operating income rose 45% year-over-year to $662 million.

Also, its non-GAAP net income came in at $698 million and $2.47 per share, representing an increase of 48.5% and 48.8% year-over-year, respectively.

Street expects INTU’s EPS and revenues for the quarter ended January 31, 2024, to increase 5% and 11.4% year-over-year to $2.31 and $3.39 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters, which is remarkable.

Over the past year, the stock has gained 52.7% to close the last trading session at $638.29. It has soared 19.9% over the past three months.

INTU’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.

It has a B grade for Growth, Sentiment, and Quality. Within the Software – Application industry, it is ranked #21 out of 131 stocks.

In addition to the POWR Ratings stated above, one can access INTU’s Value, Momentum, and Stability ratings here.

RingCentral, Inc. (RNG)

RNG provides cloud communications, video meetings, collaboration, and contact center Software-as-a-Service (SaaS) solutions worldwide. Its portfolio comprises RingCentral Message Video Phone (MVP), RingCentral Contract Center, RingCentral Engage Digital, RingCentral Engage Voice, RingCentral Video and RingCentral professional services.

RNG’s trailing-12-month gross profit margin of 69.65% is 42.6% higher than the 48.84% industry average. Its 16.51% trailing-12-month levered FCF margin is 84.2% higher than the industry average of 8.97%.

On February 5, RNG announced a new unified patient care solution for healthcare organizations globally. The solution integrates with Electronic Health Record (EHR) providers like Epic, Cerner, and AllScripts, enhancing patient engagement and simplifying workflows.

RNG’s total revenues for the third quarter, which ended September 30, 2023, increased 9.7% year-over-year to $558.16 million. Its non-GAAP income from operations rose 55.6% year-over-year to $106.83 million. The company’s non-GAAP net income increased 43.4% over the prior year quarter to $76.07 million.

In addition, its adjusted EBITDA rose 47% over the prior-year quarter to $127.80 million.

RNG’s revenue and EPS for the quarter ended December 2023, are expected to increase 8.7% and 37.1% year-over-year to $570.39 million and $0.82, respectively. It has topped the consensus EPS estimates in each of the trailing four quarters.

Over the past nine months, the stock has gained 14.1% to close the last trading session at $31.27.

RNG’s rosy outlook is reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

It has a B grade for Growth, Value, and Quality. It is ranked #11 out of 43 stocks in the B-rated Software – Business industry.

Click here to see the additional POWR Ratings of RNG for Momentum, Stability, and Sentiment.

Docebo Inc. (DCBO)

Headquartered in Toronto, Canada, DCBO operates as a learning management software company that provides artificial intelligence (AI)-powered learning platforms in North America, Europe, and the Asia-Pacific region. It offers a Learning Management System (LMS) to train internal and external workforces, partners, and customers.

DCBO’s trailing-12-month levered FCF margin of 18.18% is 102.8% higher than the 8.97% industry average. Its 80.86% trailing-12-month gross profit margin is 65.5% higher than the 48.84% industry average.

DCBO’s revenues for the third quarter ended September 30, 2023, increased 25.8% year-over-year to $46.51 million. Its gross profit rose 26.5% from the previous year’s quarter to $37.73 million. Also, its non-GAAP net income came in at $4.95 million and $0.15 per share, representing an increase of 236.4% and 275% year-over-year, respectively.

Analysts expect DCBO’s EPS and revenues for the quarter ended December 2023, to increase 101.8% and 24.2% year-over-year to $0.14 and $48.39 million, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters.

Over the past nine months, the stock has gained 47.9% to close the last trading session at $44.32.

It’s no surprise that DCBO has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system.

It has an A grade for Sentiment and Quality and a B for Growth. Within the Software – Application industry, it is ranked #11.

To see DCBO’s Value, Momentum, and Stability ratings, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

INTU shares were trading at $649.83 per share on Wednesday afternoon, up $11.54 (+1.81%). Year-to-date, INTU has gained 4.12%, versus a 4.25% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

More Resources for the Stocks in this Article

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