It’s no secret that software solutions have been playing an important role in worldwide rapid digitalization, which has been accelerated by the COVID-19 pandemic. Several companies in the software space are also expected to benefit from President Joe Biden’s $2 trillion infrastructure and economic recovery package proposal, which was unveiled on March 31. This is because software is playing a vital and increasing role in day-to-day industrial operations and in construction and manufacturing operations.
Software stocks are also expected to benefit from increasing IT spending. According to Gartner, Inc., worldwide IT spending is expected to hit $4.1 trillion in 2021. And because several countries are now experiencing a resurgence of COVID-19 infections, remote lifestyles are expected to continue for the foreseeable future, which should keep driving the growth of software companies.
So, we think it wise to bet on companies such as Open Text corporation (OTEX), Verint Systems, Inc. (VRNT), and Commvault Systems, Inc. (CVLT). Their market dominance and consistent product innovation should help them thrive in the coming months.
Open Text corporation (OTEX)
Headquartered in Waterloo, Canada, OTEX solves its customers’ digital business challenges, ranging from small- and mid-sized businesses to the world’s largest and most complex organizations. The company provides a platform and suite of software products and services that assist organizations in finding, utilizing, and sharing business information from any device. Its software and services allow organizations to manage the information that flows into, out of, and throughout their enterprise as part of daily operations.
OTEX’s net sales of $855.64 million for the fiscal 2021 second quarter ended December 31, 2020 represents a 10.9% year-over-year rise. Its gross profit has increased 11.9% year-over-year to $603.08 million. The company’s non-GAAP operating income has increased 14.9% year-over-year to $340.50 million. Also, its adjusted EBITDA increased 13.8% year-over-year to $360.80 million. OTEX’s non-GAAP EPS came in at $0.95, up 13.1% year-over-year.
For the quarter ended March 31, 2021 analysts expect OTEX’ EPS to be $0.69, which represents a 13.1% year-over-year increase. It also surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 6.1% year-over-year to $3.30 billion in fiscal 2021.
Last month, OTEX announced that OpenText Migrate had achieved the Amazon Web Services (AWS) Outposts Ready designation as part of Amazon.com, Inc. ‘s (AMZN) AWS Service Ready Program. OTEX also launched Cloud Edition (CE) 21.1 on March 11, 2021, thus delivering a tailored combination of industry solutions, API services, flexible delivery models, and expert managed services to help customers support modern work, engage customers, connect businesses to global commerce, and stay ahead of their competition. The stock has gained more than 34% over the past year and closed Friday’s trading session at $49.36.
It’s no surprise that OTEX has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Stability and a B grade for Sentiment, Growth, and Value. Click here to see OTEX’s rating for Momentum and Quality.
OTEX is ranked #2 out of 117 stocks in the Software-Application industry.
Commvault Systems, Inc. (CVLT)
CVLT is a provider of data and information management software applications and related services. Its solutions include Complete back-up and recovery, Hyperscale technology, and Orchestrate. The company’s software applications are used across various industries, including financial services, health care, manufacturing, technology and utilities, among others.
For its fiscal year 2021 third quarter, ended December 31, 2020, CVLT’s total revenues came were $188 million, indicating 6.6% growth year-over-year. Its gross profit for the quarter increased 9.4% year-over-year to $159.58 million. The company’s net income came in at $1.67 million, compared to a net loss of $650,000 in the third quarter of fiscal 2020. Its non-GAAP EPS increased 21.3% year-over-year to $0.57.
The company’s EPS and revenue for the quarter ended March 31, 2021 are expected to increase 60% and 10.7% year-over-year, respectively. Also, CVLT surpassed consensus EPS estimates in three of the trailing four quarters.
In February, CVLT announced that CRN, a brand of The Channel Company, had named John Tavares, Vice President, Global Channels and Alliances, Lamia Megdiche, Vice President, Partner Strategy and Programs, and Jesse Grindeland, Vice President, America’s Global Partner Organization, to its 2021 list of Channel Chiefs. In February it also announced a partnership with Skytap to expand data protection and migration for IBM i (AS/400) workloads hosted in Skytap on Microsoft Corporation’s (MSFT) Microsoft Azure. The stock has rallied 61.2% over the past year and closed Friday’s trading session at $67.35.
CVLT’s POWR Ratings reflects this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. It has an A grade for Growth and Quality, and a B grade Sentiment and Value. In addition to these ratings , one can see CVLT’s rating for Stability and Momentum here.
CVLT is ranked #1 in the Software – Application industry.
Verint Systems, Inc. (VRNT)
Founded in 1994, VRNT offers Actionable Intelligence solutions. It operates mainly through two segments—Customer Engagement Solutions and Cyber Intelligence Solutions. The company offers workforce forecasting and scheduling, virtual assistant, and Robotic Process Automation solutions, among others. Its solutions are used for a range of applications, including predictive intelligence, security threat analysis, and electronic data and physical assets protection.
VRNT’s $349.10 million in total revenue for fiscal 2021 fourth quarter ended January 31, 2021 represents a 2.9% year-over-year rise. While its revenue from the product segment increased 2.2% year-over-year to $127.03 million, its revenue from the service and support segment increased 3.4% year-over-year to $222.07 million. The company’s gross profit has increased more than 8% year-over-year to $237.13 million.
Analysts expect VRNT’s EPS and revenue to increase 16.4% year-over-year and 6.3% year-over-year, respectively, in fiscal 2023. Its EPS is also expected to increase at a rate of 14% per annum over the next five years. Also, VRNT surpassed consensus EPS estimates in three of the trailing four quarters.
Vericast, a leading marketing solutions company, together with its Harland Clarke contact center solutions, selected VRNT’s Verint Customer Engagement Cloud Platform on April 7, 2021 to enhance the agent and customer experience at contact centers . The company also achieved perfect scores in multiple customer satisfaction categories in March 2021 in DMG Consulting LLC’s new 2021/2022 Workforce Management (WFM) Product and Market Report. On March 9, 2021 VRNT’s Customer Engagement Cloud Platform was also recognized as a leader by multiple industry sources that honor excellence in a range of categories. The stock has rallied nearly 11% over the past year to close Friday’s trading session at $46.20.
VRNT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. It has a B grade for Value, Sentiment, and Growth. Click here to see the additional POWR Ratings for VRNT (Momentum, Quality, and Stability).
VRNT is ranked #5 of 61 stocks in the Software-Business industry.
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OTEX shares were trading at $49.61 per share on Monday afternoon, up $0.25 (+0.51%). Year-to-date, OTEX has gained 9.13%, versus a 10.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...
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