The rising adoption of cloud computing and software solutions has helped businesses make their operations more efficient, with the capacity to accommodate remote working. And the industry should continue witnessing rising demand for innovative and advanced solutions. But concerns over the Federal Reserve’s forthcoming interest rate increases have generated immense selling pressure on software companies of late.
But rising government and corporate investments in cybersecurity solutions and remote access needs should drive the industry’s growth. Investors’ optimism in this space is evidenced by the Invesco Dynamic Software ETF’s (PSJ) 0.3% gain over the past month, versus the SPDR S&P 500 Trust ETF’s (SPY) negative returns. Further, the global software market is expected to grow at a 7.1% CAGR to $824.85 billion by 2026.
Software stocks SolarWinds Corporation (SWI), Agilysys, Inc. (AGYS), Model N, Inc. (MODN), and Rimini Street, Inc. (RMNI) have been trading near their 52-week lows. However, given their latest developments and long-term growth prospects, these stocks possess immense upside potential. So, we think it could be wise to grab these stocks now.
SolarWinds Corporation (SWI)
SWI provides information technology (IT) infrastructure management software products internationally. The Austin, Tex., company’s solutions enable organizations to monitor and manage the performance of their IT environments, including on-premises and hybrid models. The company sells its products directly to network and systems engineers, database administrators, storage administrators, DevOps professionals, and managed service providers.
On Feb. 2, 2022, SWI announced the availability of its database performance monitoring products, SolarWinds Database Performance Analyzer (DPA), SolarWinds SQL Sentry, and SolarWinds Database Insights for SQL Server, in the Microsoft Corporation’s (MSFT) Microsoft Azure Marketplace. By participating in the Microsoft Azure Consumption Commitment (MACC)-transactable program, SWI should witness growing demand from the users seeking to accelerate their business transformations.
SWI had cash and cash equivalents of $708.89 million as of Sept. 30, 2021. It surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s EPS is expected to grow at a 9.1% rate per annum over the next five years.
The stock has gained 0.7% in price over the past week to close yesterday’s trading session at $13.53. It is currently trading 7.4% higher than its 52-week low of $12.60.
SWI’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Value and a B grade for Stability and Sentiment. Click here to see the additional ratings for SWI’s Growth, Quality, and Momentum. SWI is ranked #11 of 58 stocks in the Software – Business industry.
Agilysys, Inc. (AGYS)
AGYS operates as a developer and marketer of hardware and software products and services to the hospitality industry internationally. The Alpharetta, Ga.-based company offers point-of-sale, property management systems, payment, inventory and procurement, and related hospitality applications to enhance the guest experience. It also provides technical software support, maintenance, subscription services, and professional services.
On Feb. 2, 2022, The Flying Lark, a premier gaming, entertainment, and dining destination, selected AGYS’ Agilysys cloud-native solutions for its new venue in Grants Pass. AGYS’ award-winning InfoGenesis POS, IG Flex, will be introduced for mobile POS, IG OnDemand for guest self-service F&B ordering and payment, Agilysys Eatec for inventory and procurement management, and Agilysys Seat for venue reservations. This should enable AGYS to solve real-time guest experience challenges and provide an integrated experience for guests and staff.
For its fiscal year 2022 third quarter, ended Dec. 31, 2021, AGYS’ total net revenues increased 7.6% year-over-year to $39.46 million. The company’s gross profit came in at $24.72 million for the quarter, indicating a 2.2% year-over-year improvement. Its operating income was $1.61 million versus a $1.81 million loss in the prior-year period. As of Dec. 31, 2021, the company had $115.12 million in cash and cash equivalents.
Analysts expect the company’s revenue to hit $160.12 million for its fiscal year 2022, ending March 31, 2022, representing a 16.7% rise from the prior-year period. The stock has declined 0.5% in price over the past week and ended yesterday’s trading session at $39.71. It is currently trading 18.1% above its 52-week low of $33.63.
AGYS’ 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 an A grade for Quality and a B grade for Growth and Stability. Click here to see the additional ratings for AGYS (Value, Momentum, and Sentiment). AGYS is ranked #2 in the Software – Business industry.
Model N, Inc. (MODN)
MODN provides cloud revenue management solutions for life sciences and high-tech companies. The Redwood City, Calif,-based company offers implementation, managed, strategic, and customer support services. It serves primarily large and mid-sized organizations worldwide through its direct sales force.
On Feb. 1, 2022, MODN announced the general availability of its new SaaS solution for pharmaceutical and biotech companies, designed to meet the fast-growing demands of state price transparency mandates. With the increasing number of states requiring transparency reporting, this new SaaS solution should witness good demand from companies in the coming months.
MODN’s total revenues for its fiscal year 2021 first quarter, ended Dec. 31, 2021, came in at $51.54 million, representing a 20.6% rise from the prior-year period. The company’s non-GAAP gross profit was $31.08 million, indicating a 14.8% year-over-year improvement. MODN had $155.51 million in cash and cash equivalents as of Dec. 31, 2021.
The $214.75 million consensus revenue estimate for its fiscal 2022, ending Sept. 30, 2022, represents an 11% rise from the prior-year period. MODN surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s EPS is expected to grow at a 100% rate per annum over the next five years.
The stock has declined 3.8% in price over the past week to close yesterday’s trading session at $25.62. It is trading 2% higher than the 52-week low of $25.13.
MODN’s POWR Ratings reflect its solid prospects. The stock has a B grade for Growth and Quality. MODN is ranked #35 of 166 stocks in the Software – Application industry.
In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for MODN’s Value, Momentum, Sentiment, and Stability here.
Rimini Street, Inc. (RMNI)
Las Vegas-based RMNI provides enterprise software products, services, and support for various industries. The company offers software support services for Oracle and SAP enterprise software products and sells them primarily through direct sales organizations internationally.
On Jan. 11, 2022, Yarra Valley Water, the largest water utility in Melbourne, Australia, switched to RMNI’s support for its entire Oracle software portfolio, which includes Oracle Database, Oracle Middleware, and Oracle Utilities Customer Care and Billing applications. RMNI will help Yarra Valley Water reduce annual costs while maintaining and enhancing existing service quality and accelerating its digital transformation.
For its fiscal year 2021 third quarter, ended Sept. 30, 2021, RMNI’s revenue increased 15.9% year-over-year to $95.64 million. The company’s gross profit came in at $62.27 million, indicating a 23.2% year-over-year improvement. Its non-GAAP operating income was $16.50 million, representing a 57.2% rise from the prior-year period. Also, RMNI’s non-GAAP net income increased 39.8% year-over-year to $12.96 million. And as of Sept. 30, 2021, the company had $103.02 million in cash and cash equivalents.
The $415.75 million consensus revenue estimate for its fiscal year 2022, ending Sept. 30, 2021, indicates an 11.9% year-over-year improvement. The company’s EPS is expected to grow at a 15% rate per annum over the next five years. The stock has declined 6.4% in price over the past week and ended yesterday’s session at $4.83. It is trading 5.7% higher than its 52-week low of $4.57.
RMNI’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.
It has an A grade for Quality and a B grade for Growth and Value. Click here to see the additional ratings for RMNI (Momentum, Stability, and Sentiment). RMNI is ranked #3 in the Software – Application industry.
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SWI shares were trading at $13.73 per share on Tuesday morning, up $0.20 (+1.48%). Year-to-date, SWI has declined -3.24%, versus a -6.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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