With the resurgence of COVID-19 cases in several countries, the hybrid working trend is expected to continue. This, along with continuing digitization, should drive the demand for software solutions. Investors’ increasing interest in software stocks is evidenced by the SPDR S&P Software & Services ETF’s (XSW) 13.2% returns over the past six months.
The growing need for advanced software products and services in almost every industry should help the software industry keep growing in the coming months. According to Grand View Research, the global business software and services market is expected to grow at an 11.3% CAGR between 2021 – 2028.
Therefore, we think it could be wise to scoop up shares of quality software stocks Open Text Corporation (OTEX), PTC Inc. (PTC), and Progress Software Corporation (PRGS), which are expected to rally in price in the coming months.
Open Text Corporation (OTEX)
Headquartered in Waterloo, Canada, OTEX provides information management software and solutions, such as OpenText security solutions, OpenText Information Management, and OpenText Developer Cloud. Its solutions incorporate collaborative and mobile technologies and are delivered for on-premises deployment through the cloud, hybrid, and managed hosted services models.
On November 8, 2021, OTEX announced its agreement to acquire Zix Corporation, Inc., a leader in SaaS-based email encryption, threat protection, and compliance cloud solutions for small- and medium-sized businesses. OTEX’s CEO and CTO Mark J. Barrenechea said, “Acquisitions of cloud growth assets like Zix highlights our commitment to our Total Growth strategy and approach to cash-based returns.”
OTEX’s total revenues increased 3.5% year-over-year to $832.31 million in its fiscal year 2022 first quarter, ended September 30, 2021. Its gross profit came in at $574.18 million, up 3.4% year-over-year. Its income from operations was $182.69 million, compared to $182.36 million in the year-ago period. And its net income came in at $131.91 million, up 27.6% year-over-year.
Analysts expect OTEX’s revenue to increase 3% year-over-year to $4.35 billion in its fiscal year 2022. Its EPS is estimated to grow 3.9% year-over-year to $4.5 in the next year. Over the past nine months, the stock has gained 11.8% in price to close yesterday’s trading session at $52.13.
OTEX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
OTEX has a B grade for Value, Sentiment, Stability, Growth, and Quality. Within the Software-Application industry, it is ranked #1 of 166 stocks. Click here to see the additional POWR Ratings for Momentum for OTEX.
PTC Inc. (PTC)
PTC is a Needham, Mass.-based software and services company that operates worldwide. The company operates in two segments: Software Products and Professional Services. Its solutions accelerate product and service innovation, improve operational efficiency, and increase workforce productivity.
On October 28, PTC unveiled its new ThingWorx Digital Performance Management Solution. The first-of-its-kind offering represents a significant advancement in manufacturing companies’ ability to drive efficiency. Craig Melrose, EVP, Digital Transformation Solutions, PTC, said, “PTC’s new ThingWorx DPM Solution enables companies to address the most valuable manufacturing improvements and solve common challenges to drive manufacturing efficiency and transformation at scale.”
For its fiscal fourth quarter, ended September 30, 2021, PTC’s total revenue increased 22.9% year-over-year to $480.66 million. Its gross margin was $380.91 million, up 24.3% year-over-year. Its net income came in at $292.94 million, representing a 448.5% year-over-year rise. Also, its EPS increased 434.8% from the same period last year to $2.46.
PTC’s revenue is expected to be $2.13 billion in its fiscal year 2023, representing a 9.7% year-over-year rise. The company’s EPS is expected to increase 14.5% year-over-year to $5.04 in the next year. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 17.1% to close yesterday’s trading session at $117.33.
It’s no surprise that PTC has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Growth, Sentiment, and Quality.
Progress Software Corporation (PRGS)
Bedford, Mass.-based PRGS provides the best products to develop, deploy and manage high-impact business applications. The company operates through three segments: OpenEdge; Data Connectivity and Integration; and Application Development and Deployment.
On November 01, PRGS completed its acquisition of Kemp. Yogesh Gupta, CEO, Progress, said, “Kemp is an incredibly exciting opportunity for us, and we’re thrilled to welcome Kemp’s people, customers, and partners to Progress. The addition of Application Experience capabilities offers tremendous benefits to our customers and partners.”
PRGS’ non-GAAP revenue came in at $152.6 million for its fiscal third quarter ended August 31, 2021, up 37.6% year-over-year. Its non-GAAP net income came in at $52.58 million, up 47.7% year-over-year. Its non-GAAP EPS was $1.18, up 51.3% year-over-year. Furthermore, its non-GAAP operating margin was 47%, compared to 42% in the previous period.
PRGS’ revenue is expected to increase at the rate of 20.7% in its fiscal year 2021 to $550.46 million, and its EPS is expected to increase 19.7% year-over-year to $3.7 in fiscal 2021. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 32.2% in price to close yesterday’s trading session at $52.48.
PRGS has an overall A rating, which translates to a Strong Buy in our POWR Ratings. Furthermore, it has an A grade for Quality, and a B grade for Growth and Value.
Want More Great Investing Ideas?
OTEX shares were trading at $51.74 per share on Monday morning, down $0.39 (-0.75%). Year-to-date, OTEX has gained 14.27%, versus a 27.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|OTEX||Get Rating||Get Rating||Get Rating|
|PTC||Get Rating||Get Rating||Get Rating|
|PRGS||Get Rating||Get Rating||Get Rating|