The size of the global cloud computing industry is expected to grow at a CAGR of 17.5% between 2020 to 2025. The cloud industry’s potential is limitless, and companies are still experimenting with the technical boundaries of cloud computing and its various applications.
A major share of the cloud computing pie is held by technology giants such as Amazon (AMZN), Google (GOOGL), and Microsoft (MSFT). The COVID-19 pandemic-accelerated shift to cloud platforms has driven the shares of these giants to unprecedented heights. While these stocks are now trading at sky-high valuations, we think that there are several smaller and lesser-known cloud service providers that have plenty of upside based on their fundamental strength.
Paylocity Holding Corp. (PCTY), Inovalon Holdings, Inc. (INOV), Pluralsight, Inc. (PS) are three such stocks. They are using cloud-based platforms to provide innovative solutions to real-world problems. These companies are constantly upgrading their offerings to drive future growth.
Paylocity Holding Corp. (PCTY)
PCTY delivers cloud-based payroll management and human resources management services. The company has operations in the U.S. PCTY’s stock has gained 45.4% over the past year.
PCTY recently announced its acquisition of Samepage, which provides a one-stop solution for team communication and collaboration. The company also recently launched premium video capabilities on its online platform to help with flexible and seamless communication.
For the quarter ended September 30, 2020, PCTY saw a rise in total revenue of 7% compared to the same period last year. The company’s recurring and other revenues increased 11% during the same period.
PCTY is expected to see a revenue growth of 11.7% in 2021 and 22.8% in 2022. The company’s EPS is estimated to grow 26.7% in 2022 and at a rate of 22.1% per annum over the next five years.
How does PCTY stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Industry Rank
B for Overall POWR Rating
The stock is also ranked #42 of 116 stocks in the Software – Application industry.
Inovalon Holdings, Inc. (INOV)
INOV provides cloud-based data analytics and data-driven intervention platforms. The company cates primarily to the medical industry in the United States. INOV’s stock has returned 29.6% over the past year.
The company recently announced two five-year deals with post-acute care providers: Vibra Healthcare and Ernest Health. INOV also launched the Inovalon DataStream API, which provides real-time data and analytics solutions.
For the quarter ended September 30, 2020, INOV saw an increase in subscriptions revenue of 1% compared to the same period last year. The company’s net income increased 8% during the same period.
INOV’s revenue is estimated to increase 9.1% for the quarter ended March 31, 2021 and 13.3% in 2021. The company’s EPS is expected to rise 25% in 2021 and 21% per year over the next five years.
INOV’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” for Trade Grade and Peer Grade, and a “B” for Buy & Hold Grade and Industry Rank. It is ranked #18 of 77 stocks in the Medical – Services industry.
Pluralsight, Inc. (PS)
PS provides IT training services and online development for software professionals. The company has worldwide operations. PS’ stock price has increased 8.3% over the past year.
PS recently entered into an agreement to be acquired by Vista Equity Partners for$3.5 billion. PS recently acquired Next Tech, which is a cloud computing company for software development, machine learning and data science.
For the quarter ended September 2020, PS saw an increase in revenue of 20% year-over-year. The company billings grew 9% during the same period.
PS’s revenue is expected to grow 20.3% for the quarter ended March 31, 2021 and 14.6% in 2021. The company’s EPS growth is expected to be 23.1% in 2021 and 30% per annum over the next five years.
It is no surprise that PS has a “Strong Buy” rating in our POWR Ratings systems with a grade of “A” in Trade Grade, Buy & Hold Grade, and Peer Grade. In the 34-stock Outsourcing – Education Services industry, PS is ranked #3.
More Great Investing Ideas?
PCTY shares were trading at $199.97 per share on Monday afternoon, down $1.61 (-0.80%). Year-to-date, PCTY has declined -2.88%, versus a 2.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaryaman Aashind
Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|PCTY||Get Rating||Get Rating||Get Rating|
|INOV||Get Rating||Get Rating||Get Rating|
|PS||Get Rating||Get Rating||Get Rating|