In the face of formidable challenges such as surging inflation rates and significant job cuts, the software industry has displayed remarkable resilience, demonstrating its ability to overcome various market obstacles. This resilience can be attributed to the ongoing digital transformation witnessed across industries, fostering a strong and consistent demand for software products and services.
Amid this promising backdrop, it could be wise to scoop up the shares of three fundamentally sound stocks: The Sage Group plc (SGPYY), Informatica Inc. (INFA), and Park City Group, Inc. (PCYG).
While the software industry is no stranger to market volatility, it remains resilient thanks to its remarkable track record of continuous innovation, which enables it to adapt and thrive in the face of challenges. This year, worldwide spending in the software segment is expected to grow 12.3% from 2022.
The revenue in the software market is projected to reach $659 billion in 2023. Furthermore, revenue is projected to exhibit a CAGR of 5.4%, resulting in a market volume of $858.10 billion by 2028.
Moreover, the global Artificial Intelligence (AI) software market is poised for exceptional growth, driven by the escalating demand for software-based solutions and services, as well as the rapid adoption of AI tools and solutions. Projections indicate that by 2032, the market is expected to reach a staggering $1.09 trillion, exhibiting a remarkable CAGR of 23%.
This underscores significant opportunities awaiting businesses operating in the software sector.
Thus, despite the inherent volatility, the software industry is consistently pushing boundaries by introducing ground-breaking solutions that cater to evolving customer needs. With that being said, let us look at the above-mentioned stocks in detail.
The Sage Group plc (SGPYY)
Based in Newcastle upon Tyne, the United Kingdom, SGPYY provides technology solutions and services for Small and Mid-Sized Businesses (SMBs) internationally. It offers services like cloud-native solutions, such as Sage Intacct, a cloud accounting software product and financial management software, and Sage 200, a finance and business management solution.
On May 23, SGPYY announced that it had made a significant advancement in the realm of connected accounting at its Partner Summit, LV23. The latest iteration of SGPYY's digital network, called Sage Network, introduces seamless automation of workflows between businesses, irrespective of whether they use Sage or non-Sage accounting software.
Through strategic investments and partnerships, Sage Network should continue to evolve by refining automated data flows, introducing innovative solutions, and nurturing enhanced customer experiences.
On April 5, SGPYY unveiled the introduction of Sage Intacct on Microsoft Azure in the United States. This release follows the recent launch of Sage Active on Microsoft Azure in France and demonstrates Sage's commitment to delivering scalable solutions to SMBs worldwide.
By combining Sage Intacct with Microsoft Azure, SMBs in the United States can leverage the capabilities of SGPYY's acclaimed cloud financials solution within Microsoft's secure and user-friendly cloud environment.
For the six-month period that ended March 31, 2023, SGPYY’s underlying total revenue increased 16.3% year-over-year to £1.09 billion ($1.35 billion), while gross profit grew 16.6% from the year-ago value to £1.01 billion ($1.25 billion).
The company’s underlying profit for the period and EPS increased 24% from the prior-year period to £160 million ($198.32 million) and 15.49p, respectively. Also, its underlying operating profit increased 24% from the year-ago value to £227 million ($281.36 million).
SGPYY is expected to witness revenue growth of 15.7% and 7.7% year-over-year, reaching $2.68 billion and $2.89 billion in the fiscal years 2023 and 2024, respectively.
SGPYY’s shares have gained 23.7% over the past year to close the last trading session at $41.58.
SGPYY’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Stability and Quality. In the 28-stock Software - SAAS industry, it is ranked #2. To see additional POWR Ratings of SGPYY for Growth, Value, Momentum, and Sentiment, click here.
Informatica Inc. (INFA)
INFA develops an AI-powered platform that connects, manages, and unifies data across multi-cloud, hybrid systems at an enterprise scale in the United States. The company's platform includes a suite of interoperable data management products and API and application integration products.
On May 23, the company announced its plans to enhance collaboration with Microsoft to seamlessly integrate INFA's Intelligent Data Management Cloud (IDMC), which utilizes generative AI technology, with Microsoft Fabric.
Commenting on this, Jitesh Ghai, Chief Product Officer at INFA, said, “The Informatica IDMC-Microsoft Fabric integration offers frictionless delivery of our trusted data management capabilities and provides Azure customers confidence that their data is of the highest quality to power their tier-one business objectives.”
In the same month, INFA revealed an expanded collaboration with ZS, a global management consulting and technology firm, to integrate its comprehensive IDMC into ZS' cloud-native ZAIDYN platform, specifically designed for the life sciences industry. This integration is expected to facilitate a faster, more cohesive data management experience while driving improved business outcomes.
INFA’s total revenues increased marginally year-over-year to $365.43 million in the first quarter (ended March 31, 2023), while its gross profit and adjusted free cash flow rose 1.8% and 20.4% from the year-ago value to $283.53 million and $88.87 million, respectively.
The company’s non-GAAP net income amounted to $44.64 million and $0.15 per share, respectively, for the same period. Also, its non-GAAP income from operations increased 1.7% from the year-ago value to $84.81 million.
Street expects INFA’s revenue and EPS for the third quarter (ending September 30, 2023) to increase 8.5% and 15.6% year-over-year to $403.61 million and $0.21, respectively. Moreover, it surpassed the EPS estimates in three of the trailing four quarters, which is impressive.
Over the past month, the stock has gained 7.1% to close the last trading session at $16.58.
INFA’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Stability and Quality. Within the same industry, it is ranked #2. Click here to see the other ratings of INFA for Growth, Value, Momentum, and Sentiment.
Park City Group, Inc. (PCYG)
PCYG is a software-as-a-service provider that engages in the design, development, and marketing of proprietary software products. It offers cloud-based applications and services that address e-commerce, supply chain, food safety, and compliance activities.
On May 2, ReposiTrak, a wholly-owned subsidiary of PCYG, announced that Affiliated Foods, Inc., a distributor that serves over 800 member stores in the Southwest, had selected the ReposiTrak Traceability Network® (RTN), an easy-to-use, low-cost and scalable solution with minimal impact on day-to-day operations, for compliance with the FDA's recently implemented food traceability rule (FSMA 204).
On March 22, PCYG revealed that the number of RTN network members surpassed 4,000 as retailers and suppliers throughout the supply chain joined hands for improved food safety, and faster and more precise recalls.
While aiding wholesalers to keep up with regulatory compliance, this reflects the growing demand for ReposiTrak’s offering. In addition, this is expected to be beneficial for PCYG in terms of overall revenues.
PCYG’s revenues increased 5.9% year-over-year to $4.82 million in the third quarter of fiscal year 2023 (ended March 31, 2023), while its income from operations rose 29.3% from the year-ago value to $1.52 million.
The company’s net income and EPS grew 52.8% and 60% from the prior-year quarter to $1.67 million and $0.08, respectively. Also, its total operating expense declined 2.3% from the year-ago value to $3.30 million.
The consensus EPS estimate of $0.07 for the fourth quarter (ending June 30, 2023) represents a 22.6% improvement year-over-year. The consensus revenue estimate of $4.78 million for the current quarter represents a 3.8% increase from the same period last year. Moreover, it topped the EPS and revenue estimates in each of its trailing four quarters, which is excellent.
The stock has gained 37.4% over the past six months and 42.4% year-to-date to close the last trading session at $7.05.
It’s no surprise that PCYG has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has an A grade for Quality and a B for Growth, Stability, and Sentiment. Out of 28 stocks in the same industry, it is ranked first.
In addition to the POWR Ratings we’ve stated above, we also have PCGY’s ratings for Value and Momentum. Get all PCYG ratings here.
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SGPYY shares were trading at $41.83 per share on Thursday afternoon, up $0.25 (+0.60%). Year-to-date, SGPYY has gained 17.96%, versus a 8.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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