The software industry is expected to grow in the upcoming months, thanks to the continued digital transformation and remote work. So, it could be wise to bet on quality software stocks such as Manhattan Associates (MANH), Trend Micro (TMICY), American Software (AMSWA), and ChannelAdvisor (ECOM). These under-the-radar stocks are well-positioned to capitalize on industry tailwinds.
Though the number of COVID-19 cases is gradually declining, the spread of the Delta coronavirus variant remains a concern. So, software solutions are expected to be in demand. As several companies have extended their work-from-home duration, the need for cloud-based software services will not likely reduce anytime soon.
On the downside, growing cyber security threats and cyber-attacks continue to threaten the software industry. However, consistent innovation and improvements should drive the industry’s growth amid the rapid digitalization across sectors. According to Statista, the software market revenue is expected to grow at a CAGR of 7.22% to $823.71 billion by 2026.
Given this backdrop, it could be wise to bet on software stocks such Manhattan Associates, Inc. (MANH), Trend Micro Incorporated (TMICY), American Software, Inc. (AMSWA), and ChannelAdvisor Corporation (ECOM). They may not be making headlines every day but are well-positioned to capitalize on the industry tailwinds.
Manhattan Associates, Inc. (MANH)
Supply chain commerce solutions provider MANH’s solutions consist of software, services, and hardware, which coordinates people, workflows, assets, events, and tasks across the functions linked in a supply chain from planning through execution. It operates through three segments: North and Latin America; Europe, the Middle East and Africa (EMEA); and Asia Pacific (APAC).
Imperfect Foods, the leading online grocer on a mission to eliminate food waste, chose MANH’s Manhattan Active Warehouse Management on September 13 to modernize its distribution operations and support its rapid and ongoing growth. This is expected to help increase MANH’s revenues.
MANH’s net revenue increased 22.5% year-over-year to $166.11 million in the fiscal second quarter that ended June 30, 2021. Its operating income came in at $39.36 million, up 47.4% year-over-year. While its net income increased 59.3% year-over-year to $30.59 million, its EPS came in at $0.48, up 60% year-over-year.
Analysts expect MANH’s revenue and EPS to increase 10.5% and 15.9% year-over-year to $648.08 million and $2.04, respectively, in fiscal 2021. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 60.3% to close yesterday’s trading session at $153.03.
MANH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, which indicates a Buy rating in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
MANH has an A grade for Quality and a B grade for Sentiment. Within the Software – Application industry, it is ranked #24 out of 151 stocks. Click here to see additional grades for Value, Growth, Stability, and Momentum for MANH.
Trend Micro Incorporated (TMICY)
Based in Tokyo, Japan, TMICY develops and sells security-related software for computers and the Internet primarily. The company offers both hybrid cloud security solutions and network security solutions. In addition, its main products include personal computer (PC) client products, local area network (LAN) server products, and Internet server products.
On September 13, TMICY announced the launch of Trend Micro Family, a digital tool to help parents ensure their children’s screen time is safe, positive, and healthy. This move is expected to help the company expand its consumer base. Moreover, it announced its plans to develop features in Trend Micro Family to include support for additional social media apps.
TMICY’s total revenues increased 8.2% year-over-year to YEN 91.33 billion ($817.03 million) for the six months that ended June 30, 2021. Its gross profit increased 5% year-over-year to YEN 71.24 billion ($637.35 million). Its operating income came in at YEN 22.11 billion ($197.84 million), representing a 10.3% year-over-year rise. Also, its net income increased 8.3% year-over-year to YEN 16.13 billion ($144.34 million).
For fiscal 2021, TMICY’s revenue is expected to grow 145.1% year-over-year to $1.67 billion. Its EPS is expected to grow at a rate of 16.3% over the next five years. Also, over the past six months, the stock has gained 10% to close yesterday’s trading session at $55.77.
It’s no surprise that TMICY has an overall grade of B, which equates to a Buy rating in our POWR Ratings system. In addition, it has an A grade for Stability and Quality, and a B grade for Value.
American Software, Inc. (AMSWA)
AMSWA develops, markets, and supports a range of computer business application software products in the United States and internationally. The company operates through three segments: Supply Chain Management (SCM), Information Technology Consulting (IT Consulting), and Other.
AMSWA declared a quarterly dividend of $0.11 per share, payable on December 3. Moreover, the company has paid dividends for 17 consecutive years. This represents its solid financial strength.
For the fiscal first quarter that ended July 31, 2021, AMSWA’s total revenues increased 7.3% year-over-year to $29.27 million. Its operating earnings came in at $1.77 million, up 100.3% year-over-year. Its net earnings came in at $2.95 million, representing a 44.9% year-over-year rise. Also, its EPS came in at $0.09, up 50% year-over-year.
AMSWA’s revenue is expected to grow 8.9% year-over-year to $131.14 million in fiscal 2023. Its EPS is expected to grow 25% year-over-year to $0.4 in the next year. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 67.3% to close yesterday’s trading session at $23.75.
AMSWA’s POWR Ratings reflect this promising outlook. The stock has an overall grade of A, which equates to a Strong Buy rating in our proprietary ratings system. In addition, it has an A grade for Sentiment, and a B grade for Growth, Stability, and Quality.
AMSWA is ranked #5 in the Software – Application industry. Click here to see AMSWA’s grades for Value and Momentum as well.
ChannelAdvisor Corporation (ECOM)
Cloud-based e-commerce solutions provider ECOM’s software-as-a-service (SaaS) cloud platform, enables users to manage their product listings, inventory availability, pricing optimization, search terms, orders and fulfillment, and other critical functions across these channels. Its solutions include various platform modules like Marketplaces, Dropship, Digital Marketing, and Shoppable Media.
ECOM unveiled new enhancements to its multi-channel commerce platform in August 2021 designed to help brands and retailers expand their audience reach, improve the consumer shopping experience, and increase product visibility to drive online sales. So, this is expected to help boost the company’s sales.
ECOM’s revenue increased 10.9% year-over-year to $41.54 million for the fiscal second quarter that ended June 30, 2021. The company’s gross profit came in at $32.01 million, up 5.3% year-over-year. Also, its total assets came in at $201.20 million for the period ended June 30, 2021, compared to $180.66 million for the period ended December 31, 2020.
Analysts expect ECOM’s revenue to be $180.83 million in fiscal 2022, representing a 9.3% year-over-year rise. In addition, the company’s EPS is expected to increase 17.4% year-over-year to $1.01 in the next year. Also, it surpassed Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 74.4% to close yesterday’s trading session at $25.23.
ECOM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, which indicates a Buy rating in our proprietary ratings system.
In addition, ECOM has an A grade for Quality, and a B grade for Value and Sentiment. Within the Software – Application industry, it is ranked #21. Also, click here to see additional grades for Stability, Momentum, and Growth.
MANH shares were trading at $153.63 per share on Friday afternoon, up $0.60 (+0.39%). Year-to-date, MANH has gained 46.06%, versus a 16.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, she helps investors make informed investment decisions through her insightful commentaries.