With the highly contagious COVID-19 Delta variant spreading rapidly in several countries, the remote working trend is expected to continue. This, along with the continuing, global digitization, should drive the demand for software solutions.
According to Grand View Research, the global business software and services market is expected to grow at an 11.3% CAGR between 2021 - 2028.
So, we think it could be wise to bet on quality software stocks Cornerstone OnDemand, Inc. (CSOD) and Magic Software Enterprises Ltd. (MGIC).They are not necessarily making headlines but possess solid growth attributes and are expected to advance significantly in the coming months.
Click here to check out our Software Industry Report for 2021
Cornerstone OnDemand, Inc. (CSOD)
Cloud computing company CSOD in Santa Monica, Calif., provides learning and people development solutions as software-as-a-service (SaaS) worldwide. It serves several industries, including business services, financial services, healthcare, pharmaceuticals, retail, and technology industries.
CSOD’s CEO, Phil Saunders, said, “We have continued to execute on our transformation roadmap, and while we believe we have an aggressive roadmap to implement this year, we remain confident in our ability to unlock growth and earnings power within the business.”
The company’s net revenue increased 39.4% year-over-year to $209.30 million for the first quarter, ended March 31, 2021. Its non-GAAP operating income grew 137.7% year-over-year to $59.20 million, while its non-GAAP net income increased 222.7% year-over-year to $48.40 million. The company’s EPS increased 204.3% year-over-year to $0.70. CSOD’s revenue and total assets have grown at 16.7% and 28.7% CAGRs, respectively, over the past three years.
Analysts expect CSOD’s EPS and revenue to increase 32% and 15.7%, respectively, year-over-year to $2.35 and $856.96 million in its fiscal year 2021. In addition, it surpassed consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 38.1% to close yesterday’s trading session at $48.16.
CSOD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates 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 Value, Sentiment, and Growth. We have also graded CSOD for Quality, Stability, and Momentum. Click here to access all CSOD’s ratings. CSOD is ranked #18 of 137 stocks in the Software - Application industry.
Note that CSOD is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
Magic Software Enterprises Ltd. (MGIC)
Headquartered in Or Yehuda, Israel, MGIC provides proprietary application development, business process integration, vertical software solutions, and information technologies outsourcing software services internationally. Its product portfolio includes Magic xpa Application Platform; AppBuilder Application Platform; and Magic xpi Integration Platform.
MGIC introduced FactoryEye to North American manufacturers in April. FactoryEye's plug-and-play IIoT platform enables mid-sized manufacturers to achieve digital transformation with real-time intelligence. This could propel increasing demand for this solution in the coming months.
The company’s net revenue increased 25.9% year-over-year to $107.30 million for the first quarter ended March 31, 2021. Its non-GAAP operating income came in at $15 million, up 36.6% year-over-year. Its non-GAAP net income grew 9.5% year-over-year to $10.30 million. In addition, the company’s non-GAAP EPS increased 10.5% year-over-year to $0.21. Over the past three years, MGIC’s revenue and EPS have grown at 13.8% and 14.1% CAGRs, respectively.
For the quarter ending September 30, 2021, analysts expect MGIC’s EPS and revenue to increase 15.8% and 22.4%, respectively, year-over-year to $0.22 and $108.97 million. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has surged 51.5% over the past year to close yesterday’s trading session at $17.36.
MGIC’s POWR Ratings reflect this promising outlook. The company has an overall A rating , which translates to a Strong Buy in our proprietary ratings system. The stock has an A grade for Sentiment, and a B grade for Growth, Stability, and Momentum.
Within the Software - Application industry, MGIC is ranked #4. To see the additional POWR Ratings for MGIC (Value and Quality), click here.
Click here to check out our Software Industry Report for 2021
CSOD shares were trading at $48.32 per share on Thursday afternoon, up $0.16 (+0.33%). Year-to-date, CSOD has gained 9.72%, versus a 18.86% 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.
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