The software industry is not just growing, but thriving, thanks to the steady adoption of digital technologies that have revolutionized the market in recent years. In this stable and promising landscape, investors could consider buying robust software stocks WalkMe Ltd. (WKME), American Software, Inc. (AMSWA), and Rimini Street, Inc. (RMNI), which seem to trade at attractive prices.
The global landscape is being reshaped by digitalization, as industries worldwide integrate digital technologies into their operations. This widespread adoption of digital technologies is driving the demand for software products and services, underscoring the pivotal role of the software sector in shaping the future of global commerce.
As a result, revenue in the software market is projected to reach $353.50 billion in 2024. Looking ahead, revenue is expected to grow at a CAGR of 4.1%, resulting in a market volume of $414.70 billion by 2028.
Furthermore, the increasing prevalence of digital transformation initiatives across various sectors is driving up the demand for custom software solutions tailored to specific company needs. This trend is expected to continue, indicating a bright future for the software industry. The global application development software market is poised to grow at a CAGR of 7.8% by 2032.
Furthermore, investors' trust in the potential growth of software stocks amidst continuous technological advancements and evolving business demands is evident in the strong performance of the iShares Expanded Tech-Software Sector ETF (IGV), which has returned 39.9% over the past year.
Given these favorable industry trends, let’s look at the fundamentals of the top Software - Application stocks, beginning with the third choice.
Stock #3: WalkMe Ltd. (WKME)
Based in Tel Aviv, Israel, WKME provides a cloud-based digital adaption platform and associated professional services internationally. The digital adoption platform, powered by AI, assists businesses in smoothly managing technological changes. It assesses, organizes, and provides tailored guidance and automation to support companies effectively.
On April 15, 2024, WKME unveiled significant milestones showcasing its ongoing dominance in the digital adoption platform (DAP) sector, which is rapidly gaining traction within a $34 billion market. These achievements include a bold array of AI-centric product innovations and patents, analyst and industry recognition, superior customer service reviews, category-defining thought leadership, and continued financial growth.
Also, on February 20, WKME introduced Workflow Accelerators, a robust set of predefined solutions designed to eliminate friction in key workflows, revolutionizing the way businesses address workflow inefficiencies.
Each Workflow Accelerator identifies typical pain points encountered by users and is linked to a collection of fully adaptable templates. These templates come equipped with pre-established WalkMe in-app guidance, automations, data validation, and more functionalities.
WKME’s forward EV/Sales of 1.66x is 42.2% lower than the industry average of 2.87x. Its forward Price/Sales multiple of 2.72 is 5.8% lower than the industry average of 2.89.
WKME’s total revenues and non-GAAP gross profit for the fourth quarter that ended December 31, 2023, increased 4.7% and 10.4% year-over-year to $67.99 million and $57.90 million, respectively. Non-GAAP net income stood at $6.84 million and $0.07 per share, compared to a loss of $8.89 million and $0.10 per share from the prior-year quarter, respectively.
Street expects WKME’s revenue for the first quarter (ended March 2024) to increase 3.4% year-over-year to $68.11 million. Also, WKME’s EPS is expected to be $0.02 for the same quarter. The company surpassed consensus EPS estimates in each of the trailing four quarters, which is impressive.
Shares of WKME have gained 8.8% over the past month, closing the last trading session at $8.39.
WKME’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
WKME has a B grade for Growth, Sentiment, and Stability. It is ranked #24 among 136 stocks in the Software - Application industry.
Click here to access the additional WKME ratings (Momentum, Quality, and Value).
Stock #2: American Software, Inc. (AMSWA)
AMSWA develops, markets, and supports a range of computer business application software products internationally. The company operates through Supply Chain Management (SCM); Information Technology Consulting (IT Consulting); and other segments. It offers network optimization, integrated business planning, IT staffing, consulting services, etc.
AMSWA’s forward EV/Sales of 2.61x is 9.3% lower than the industry average of 2.88x. Its forward non-GAAP P/E multiple of 22.26 is 7.9% lower than the industry average of 24.17.
During the fiscal 2024 third quarter ended January 31, 2024, AMSWA’s revenue from subscription fees increased 8.5% year-over-year to $14.11 million. The company reported adjusted EBITDA from continuing operations of $4.04 million. In addition, the company’s adjusted net earnings from continuing operations rose 45.4% year-over-year to $6.34 million. Its non-GAAP earnings per share from continuing operations grew 46.2% year-over-year to $0.19.
Analysts expect AMSWA’s revenue for the year ending April 2025 to increase 3.4% year-over-year to $105.72 million. Its EPS is likely to be $0.38 for the same year. Moreover, AMSWA has surpassed consensus EPS estimates in three of the trailing four quarters.
AMSWA’s stock soared marginally intraday to close the last trading session at $10.39.
AMSWA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
The stock has an A grade for Sentiment and a B for Value and Quality. ASMWA is ranked #19 in the same industry.
Beyond what is stated above, we’ve also rated AMSWA for Growth, Stability, and Momentum. Get all AMSWA ratings here.
Stock #1: Rimini Street, Inc. (RMNI)
RMNI provides enterprise software products, services, and support. The company engages in the provision of support services for Oracle and SAP enterprise software products. The company also provides Rimini ONE, an outsourcing option that offers a set of unified and integrated services to run, manage, support, customize, configure, connect, protect, monitor, and optimize its clients' application, database, and technology enterprise software.
On May 15, RMNI declared that Pacific Healthcare Group, the leading sales and marketing services organization for the Southeast Asian healthcare industry, had opted for Rimini Support for Oracle, which includes support for Oracle EBS, Oracle Technology, and Oracle Database.
On February 27, RMNI announced the launch of Rimini Custom, a new service offering that expands the company’s leading support and services to a broader scope of enterprise software products and releases.
RMNI’s forward EV/Sales of 0.38x is 86.8% lower than the industry average of 2.88x. Its forward non-GAAP P/E multiple of 6.62 is 72.6% lower than the industry average of 24.17.
In the first quarter that ended March 31, 2024, RMNI’s revenue increased 1.2% year-over-year to $106.75 million. The company’s non-GAAP operating income and net income came in at $8.85 million and $6.80 million, respectively. Also, its adjusted EBITDA stood at $10.68 million.
The market expects RMNI’s revenue and EPS for the fiscal year ending December 2025 to increase 3.6% and 4.7% year-over-year to $444.88 million and $0.37, respectively. Additionally, the company has topped the consensus revenue estimates in each of the trailing four quarters.
Shares of RMNI fell 2.5% intraday to close the last trading session at $2.36.
RMNI’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
RMNI has an A grade for Value and a B for Stability and Quality. It is ranked #16 in the same industry.
In addition to the POWR Ratings highlighted above, one can access RMNI’s ratings for Momentum, Growth, and Sentiment here.
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WKME shares were unchanged in premarket trading Friday. Year-to-date, WKME has declined -21.37%, versus a 11.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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