Software is eating the world, and virtually no business is left untouched by it. Companies bringing it to life have been rewarded with explosive earnings growth and high valuation multiples, but the latter has weighed on returns as the industry was flat over the past six months. A consolation is that the S&P 500 hasn’t budged either.
However, some businesses can support their premium valuations with superior earnings growth, and our mission at StockStory is to help you find them. Keeping that in mind, here is one software stock boasting a durable advantage and two we’re swiping left on.
Two Software Stocks to Sell:
LiveRamp (RAMP)
Market Cap: $1.95 billion
Started in 2011 as a spin-out of RapLeaf, LiveRamp (NYSE: RAMP) is a software-as-a-service provider that helps companies better target their marketing by merging offline and online data about their customers.
Why Are We Hesitant About RAMP?
- Revenue increased by 12.9% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Estimated sales growth of 7.1% for the next 12 months implies demand will slow from its three-year trend
LiveRamp’s stock price of $29.64 implies a valuation ratio of 2.5x forward price-to-sales. To fully understand why you should be careful with RAMP, check out our full research report (it’s free).
Marqeta (MQ)
Market Cap: $2.34 billion
Founded by CEO Jason Gardner in 2009, Marqeta (NASDAQ: MQ) is an innovative card issuer that provides companies with the ability to issue and process virtual, physical, and tokenized credit and debit cards.
Why Does MQ Fall Short?
- Annual sales declines of 2.8% for the past three years show its products and services struggled to connect with the market
- High servicing costs result in a relatively inferior gross margin of 69.4% that must be offset through increased usage
Marqeta is trading at $5.09 per share, or 4.1x forward price-to-sales. Dive into our free research report to see why there are better opportunities than MQ.
One Software Stock to Buy:
The Trade Desk (TTD)
Market Cap: $38.09 billion
Founded by former Microsoft engineers Jeff Green and Dave Pickles, The Trade Desk (NASDAQ: TTD) offers cloud-based software that uses data to help advertisers better plan, place, and target their online ads.
Why Is TTD a Good Business?
- Average billings growth of 25.6% over the last year enhances its liquidity and shows there is steady demand for its products
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
- Healthy operating margin of 17.6% shows it’s a well-run company with efficient processes, and it turbocharged its profits by achieving some fixed cost leverage
At $77.32 per share, The Trade Desk trades at 13.2x forward price-to-sales. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
