Data breaches and cyber-attacks continue to hinder the performance of software-as-a-service (SaaS) companies. However, the industry is expected to grow exponentially over the long term, owing to increasing demand from almost every industry as part of their digital transformation efforts.

Furthermore, the remote working trend is expected to continue with the recent resurgence of COVID-19 cases, to the benefit of the SaaS industry. According to a Research and Markets report, the global SaaS market is expected to grow at a 10% CAGR  between 2021 and 2023.

So, we think it could be wise to bet on SaaS stocks The Sage Group plc (SGPYY) and MiX Telematics Limited (MIXT), which  possess strong fundamentals and promising growth prospects.

Click here to check out our Software Industry Report for 2021

The Sage Group plc (SGPYY)

Headquartered in Newcastle upon Tyne, the United Kingdom, SGPYY provides technology solutions and services to small- and medium businesses internationally. It also  offers cloud-native solutions, such as Sage Intacct, Sage People, Sage Accounting, Sage Payroll, and CakeHR.

SGPYY unveiled its Sage 20 for 20 on July 28. It is an accountant accelerator program designed to provide partners with solutions and resources essential to grow and scale their business. AZ Zabala, the company’s Director of Accounts Sales and Strategy, said, “Our partners are excited about the measurable impact and their ability to deliver more value to customers and mitigate costs.”

SGPYY’s recurring revenue increased 5% year-over-year to £1.22 billion ($1.43 billion) for the nine months ended June 30, 2021. It was driven primarily by solid software subscription growth, which came in at £920 million ($1.08 billion), up 11% year-over-year. As a result, its subscription penetration increased to 69%, versus  64% in the prior-year period.

SGPYY’s annual revenue is expected to increase 3.9% year-over-year to $2.67 billion in its fiscal year 2022. The stock has rallied 23.5% year-to-date to close yesterday’s trading session at $40.02.

SGPYY’s POWR Ratings reflect this promising outlook. The company has an overall B , which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

The stock also has a B grade for Quality, Stability, and Value. Within the Software – SAAS industry, SPGYY is ranked #2 of 15 stocks. To see SGPYY’s ratings for Growth, Sentiment, and Momentum as well, click here.

MiX Telematics Limited (MIXT)

MIXT provides fleet and mobile asset management solutions through a software-as-a-service delivery model. Its offerings include MiX Fleet Manager, MiX Asset Manager, Matrix, Beam-e, and MiX Now. In addition, it delivers fleet and mobile asset management solutions as SaaS to 744,677 subscribers. MIXT is based in  Midrand, South Africa.

On August 2, 2021, MIXT announced that the U.K.’s largest independent bus operator, McGill’s Group, has chosen it as its connected fleet technology partner. Richard Adams, Sales Director for MIXT Europe, said, “We are looking forward to many successful years ahead working together in partnership.”

MIXT’s revenue increased 26.9% year-over-year to $34.90 million for its  fiscal first quarter, ended June 30, 2021. Its adjusted EBITDA grew 10.7% year-over-year to $8.30 million, while its non-GAAP net income increased 61.1% year-over-year to $2.90 million. The company’s non-GAAP EPS increased 66.7% year-over-year to $0.50.

Analysts expect MIXT’s EPS and revenue to increase 31.4% and 10%, respectively,  year-over-year to $0.46 and $149.16 million in its fiscal year 2023. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 61.4% to close yesterday’s trading session at $14.66.

MIXT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. In addition, it has an A grade for Value and Sentiment, and a B grade for Quality.

We also have graded MIXT for Growth, Stability, and Momentum. Click here to access all MIXT’s ratings. Again, MIXT is ranked #1 in the Software – SAAS industry.

Click here to check out our Software Industry Report for 2021

SGPYY shares were trading at $40.50 per share on Wednesday afternoon, up $0.48 (+1.20%). Year-to-date, SGPYY has gained 28.30%, versus a 19.27% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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