From commerce to culture, software is digitizing every aspect of our lives. 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 19.9% gain has lagged the S&P 500 by 6 percentage points.
However, some businesses can support their premium valuations with superior earnings growth, and our mission at StockStory is to help you find them. On that note, here is one software stock poised to generate sustainable market-beating returns and two we’re passing on.
Two Software Stocks to Sell:
GoDaddy (GDDY)
Market Cap: $17.72 billion
Known for its memorable Super Bowl commercials that put it on the map, GoDaddy (NYSE: GDDY) is a domain registrar and web services provider that helps entrepreneurs establish an online presence through domain registration, website building, hosting, and e-commerce tools.
Why Should You Sell GDDY?
- New contracts were hard to come by as its average bookings growth of 8.1% over the last year underwhelmed
- Estimated sales growth of 6.9% for the next 12 months is soft and implies weaker demand
- Gross margin of 64% reflects its relatively high servicing costs
At $128.64 per share, GoDaddy trades at 3.6x forward price-to-sales. If you’re considering GDDY for your portfolio, see our FREE research report to learn more.
VeriSign (VRSN)
Market Cap: $24.27 billion
As the silent guardian of the internet's roadmap, VeriSign (NASDAQ: VRSN) operates the authoritative registry for .com and .net domain names, enabling websites to be found reliably when users type web addresses.
Why Are We Cautious About VRSN?
- Sales trends were unexciting over the last two years as its 4.5% annual growth was well below the typical software company
- Projected sales growth of 5.3% for the next 12 months suggests sluggish demand
- Operating margin failed to increase over the last year, indicating the company couldn’t optimize its expenses
VeriSign’s stock price of $264.92 implies a valuation ratio of 14.5x forward price-to-sales. To fully understand why you should be careful with VRSN, check out our full research report (it’s free for active Edge members).
One Software Stock to Watch:
BILL (BILL)
Market Cap: $5.05 billion
Transforming the messy back-office financial operations that plague small business owners, BILL (NYSE: BILL) provides a cloud-based platform that automates accounts payable, accounts receivable, and expense management for small and midsize businesses.
Why Are We Positive On BILL?
- Annual revenue growth of 56.1% over the last five years was superb and indicates its market share is rising
- Superior software functionality and low servicing costs lead to a premier gross margin of 84.3%
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
BILL is trading at $50.94 per share, or 3.2x forward price-to-sales. Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our 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 Kadant (+351% 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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