Software is rapidly reducing operating expenses for businesses. The undeniable tailwinds fueling SaaS companies have led to lofty valuation multiples historically, but rich prices also make re-ratings harder and place a ceiling on returns - over the past six months, the industry’s 15.2% gain has lagged the S&P 500 by 9.2 percentage points.
Investors should tread carefully as only some businesses are worthy of their valuations, and luckily for you, we started StockStory to help you find them. Keeping that in mind, here are two software stocks boasting durable advantages and one we’re steering clear of.
One Software Stock to Sell:
UiPath (PATH)
Market Cap: $9.23 billion
Starting with robotic process automation (RPA) and evolving into a comprehensive automation powerhouse, UiPath (NYSE: PATH) provides an AI-powered business automation platform that enables organizations to create software robots that mimic human actions to streamline repetitive tasks and processes.
Why Are We Hesitant About PATH?
- Customers had second thoughts about committing to its platform over the last year as its billings plateaued
- Estimated sales growth of 9.6% for the next 12 months implies demand will slow from its two-year trend
- Poor expense management has led to operating margin losses
UiPath is trading at $17.42 per share, or 5.8x forward price-to-sales. To fully understand why you should be careful with PATH, check out our full research report (it’s free for active Edge members).
Two Software Stocks to Watch:
Semrush (SEMR)
Market Cap: $1.16 billion
Born from the need to make sense of the complex digital marketing landscape, Semrush (NYSE: SEMR) is a software-as-a-service platform that helps companies improve their online visibility, analyze digital marketing efforts, and optimize content across search engines and social media.
Why Are We Positive On SEMR?
- Billings have averaged 23% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
- Superior software functionality and low servicing costs result in a top-tier gross margin of 81.4%
- Free cash flow margin is anticipated to expand by 7.1 percentage points over the next year, providing additional flexibility for investments and share buybacks/dividends
At $7.88 per share, Semrush trades at 2.4x forward price-to-sales. Is now a good time to buy? See for yourself in our full research report, it’s free for active Edge members.
DoubleVerify (DV)
Market Cap: $1.94 billion
Using advanced analytics to evaluate over 17 billion digital ad transactions daily, DoubleVerify (NYSE: DV) provides AI-powered technology that verifies digital ads are viewable, fraud-free, brand-suitable, and displayed in the intended geographic location.
Why Do We Like DV?
- Annual revenue growth of 27.9% over the past five years was outstanding, reflecting market share gains
- Prominent and differentiated software culminates in a stellar gross margin of 82.1%
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
DoubleVerify’s stock price of $11.84 implies a valuation ratio of 2.5x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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