4 Software Stocks Rated 'Strong Buy' in the POWR Ratings

The demand for efficient data analysis, customer services, and workflow management should keep driving the demand for cloud-based software services worldwide. Huge corporate spending on digitizing operations should also boost the industry’s growth.

The continuing increase in COVID-19 cases is forcing companies to delay their office reopening plans, so the demand for advanced software products and solutions continues to rise. Also, growing interest in advanced driver assistance systems (ADAS), machine learning, and artificial intelligence position the industry well for growth. The global software market is expected to grow at a 7.4% CAGR to $825.02 billion by 2026.

Therefore, fundamentally sound software stocks Commvault Systems, Inc. (CVLT), Enghouse Systems Limited (EGHSF), American Software, Inc. (AMSWA), and eGain Corporation (EGAN) could be solid bets now. Also, our proprietary POWR Ratings system has rated these stocks ‘Strong Buy.’

Click here to check out our Software Industry Report for 2021

Commvault Systems, Inc. (CVLT)

CVLT provides data protection and information management software applications and related services internationally. The Oceanport, N.J.-based company also sells appliances that integrate the software with hardware for use in a range of business needs and use cases. It sells directly through its sales force to enterprises, government agencies and indirectly through its distribution network, value-added resellers, systems integrators, corporate resellers, and OEMs.

On October 5, 2021, CVLT announced the availability of its award-winning Metallic Backup-as-a-Service (BaaS) solutions. With the growing adoption of cloud services, the rising demand for agile, cloud-delivered data management to mitigate cyber threats and ensure recoverability should enable the company’s offerings to generate great demand from enterprises now.

In September, CVLT added its new Ransomware Protection and Response Services offering to its Data Security Solutions portfolio to assist customers in combating rising cyber threats and data breaches. Along with Commvault software and cloud offerings, this offering will likely witness great demand in the coming months from hybrid working models in the coming months.

CVLT’s total revenue for its fiscal first quarter, ended June 30, 2021, increased 6% year-over-year to $183.42 million. The company’s gross profit has been reported at $158.15 million, up 6.5% from the prior-year period. Its non-GAAP income from operations came in at $41 million, representing a 26.3% year-over-year improvement. CVLT’s non-GAAP net income was $30.03 million, up 25.4% from the prior-year period. And its non-GAAP EPS increased 21.6% year-over-year to $0.62. The company had $359.15 million in cash and cash equivalents as of June 30, 2021.

CVLT’s EPS is estimated to rise 22.3% year-over-year to $2.58 in the current year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect its revenue to be $769.89 million for the current year, representing a 6.4% rise year-over-year. The stock’s EPS is expected to grow at a 10% rate per annum over the next five years. Over the past six months, the stock has gained 9.6% and ended Friday’s trading session at $75.47.

CVLT’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating 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 Quality, and a B grade for Growth, Value, and Sentiment. Click here to see the additional ratings for CVLT’s Stability and Momentum.

Of the 160 stocks in the Software - Application industry, CVLT is ranked #2.

Enghouse Systems Limited (EGHSF)

Based in Canada, EGHSF develops enterprise software solutions for automated mapping, facilities management, and geographic information systems. Worldwide. The company operates through two segments--Interactive Management Group and Asset Management Group.

On July 7, 2021, EGHSF acquired Momindum SAS, an all‐in‐one SaaS enterprise video platform that manages virtual events, recording, editing, and sharing interactive video presentations. Momindum’s next-gen solution complements EGHSF’s Vidyo offering while also broadening its video collaboration solutions.

EGHSF acquired Nebu BV, an Amsterdam-based market research and data analytics software solutions provider, on June 3, 2021. Nebu’s applications enhance EGHSF’s market research solutions, combine surveying and community technologies with AI capabilities, and increase its ability to serve customers better.

EGHSF had $184.43 million in cash and cash equivalents as of July 31, 2021. Analysts expect its revenue to be $97.18 million for the current quarter ending October 31, 2021, representing a 2.3% rise year-over-year. The stock has declined 4.4% in price over the past six months and closed Friday’s trading session at $45.05.

EGHSF’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.

The stock has an A grade for Quality and Stability, and a B grade for Value. Click here to see the additional ratings for EGHSF’s (Growth, Sentiment, and Momentum).

EGHSF is ranked #6 in the Software - Application industry.

American Software, Inc. (AMSWA)

AMSWA develops, markets, and supports a range of computer business application software products and services that deliver enterprise management, supply chain, and retail planning solutions to the marketplace internationally. The Atlanta, Ga., concern operates through three segments--Supply Chain Management (SCM); Information Technology Consulting; and Other.

On September 28, 2021, AMSWA subsidiary Logility, Inc. partnered with Visus LLC, an enterprise software solutions company that develops enterprise-ready web applications and business intelligence solutions. Visus’ tools will enable AMSWA’s customers to improve their operating efficiency, enhance customer experience, and develop a competitive advantage. On September 9, AMSWA subsidiary Logility, Inc, a leader in supply chain innovation, partnered with PwC, an integrated consulting and auditing services firm, to bring the latest innovation in supply chain technology and services that enable digital transformation to strengthen its local Brazilian market presence. Providing greater efficiency, better alignment with demand, optimization of inventory, and reduced costs, the company expects to witness great demand for this solution from enterprises in the coming months.

For its fiscal first quarter, ended July 31, 2021, AMSWA’s total revenues increased 7.3% year-over-year to $29.27 million. The company’s gross profit came in at $16.90 million, up 18.7% from the prior-year period. Its adjusted operating earnings were $2.60 million, indicating a 49.2% year-over-year improvement. While its adjusted net income increased 28% year-over-year to $3.61 million, its adjusted EPS increased 22.2% to $0.11. As of July 31, 2021, the company had $91.85 million in cash and cash equivalents.

A $120.38 million consensus revenue estimate for the current year indicates an 8.1% year-over-year improvement. It surpassed the consensus EPS estimates in each of the trailing four quarters. And its EPS is expected to grow at a 16% rate per annum over the next five years. AMSWA has gained 31.2% in price over the past six months and ended Friday’s trading session at $26.79.

It’s no surprise that AMSWA has an overall A rating, which equates to Strong Buy in our POWR Ratings system.

The stock has an A grade for Sentiment, and a B grade for Quality, Growth, and Stability. Click here to see the additional ratings for AMSWA’s Value and Momentum.

It is ranked #5 in the Software - Application industry.

eGain Corporation (EGAN)

EGAN in Sunnyvale, Calif., develops, licenses, implements, and supports customer service infrastructure software solutions internationally. The company provides unified cloud software solutions to automate, augment, and orchestrate customer engagement. It serves customers in various industry sectors, including financial services, telecommunications, retail, government, healthcare, and utilities.

EGAN announced the availability of eGain Knowledge Hub, the company’s next-gen knowledge management solution, on September 7, 2021. Powered by AI reasoning, machine learning, Natural Language Processing, and analytics, eGain Knowledge Hub will help organizations provide a better customer experience and expect great demand in the coming months.

On September 1, 2021, EGAN announced that a leading cryptocurrency exchange selected its eGain Knowledge Hub to provide knowledge-powered customer service. Because fast-changing government regulations require compliance across customer interactions, transactional record-keeping, and information reporting, this selection should enable EGAN to deliver accurate, consistent, and compliant service at scale to its global customer base.

For its fiscal fourth quarter, ended June 30, 2021, EGAN’s total revenues increased 6.4% year-over-year to $20.25 million. The company’s gross profit came in at $15.25 million, up 7.9% from the prior-year period. As of June 30, 2021, the company had $63.23 million in cash and cash equivalents.

EGAN’s revenue is estimated to rise 13.9% year-over-year to $89.15 million in the current year. It surpassed the Street’s EPS estimates in three of the trailing four quarters. EGAN’s EPS is expected to grow at a 10% rate per annum over the next five years. Over the past six months, the stock has gained 1.6% in price and ended Friday’s trading session at $10.10.

EGAN’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.

The stock has an A grade for Quality, and a B grade for Value, Stability, and Sentiment. Click here to see the additional ratings for EGAN’s Growth and Momentum.

EGAN is ranked #4 in the Software - Application industry.

Click here to check out our Software Industry Report for 2021

CVLT shares were unchanged in after-hours trading Monday. Year-to-date, CVLT has gained 36.82%, versus a 20.78% rise in the benchmark S&P 500 index during the same period.

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.

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