Software is eating the world, and virtually no business is left untouched by it. This secular theme makes SaaS companies attractive investment candidates but also comes with higher valuations that cause volatility. Unfortunately, the rich prices have haunted them over the past six months as the industry has shed 7.1%. This drawdown was discouraging since the S&P 500 stood firm.

A cautious approach is imperative when dabbling in these businesses as the best will deliver robust earnings growth while the rest will be disrupted by competition and AI. With that said, here is one software stock poised to generate sustainable market-beating returns and two best left ignored.

Two Software Stocks to Sell:

Okta (OKTA)

Market Cap: $17.72 billion

Founded during the aftermath of the financial crisis in 2009, Okta (NASDAQ: OKTA) is a cloud-based software-as-a-service platform that helps companies manage identity for their employees and customers.

Why Are We Wary of OKTA?

1. Customers had second thoughts about committing to its platform over the last year as its average billings growth of 9.9% underwhelmed
2. Estimated sales growth of 9.1% for the next 12 months implies demand will slow from its three-year trend
3. Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 1.4 percentage points

Okta’s stock price of $101.60 implies a valuation ratio of 6.3x forward price-to-sales. If you’re considering OKTA for your portfolio, see our FREE research report to learn more.

Wix (WIX)

Market Cap: $8.61 billion

Founded in 2006 in Tel Aviv, Wix.com (NASDAQ: WIX) offers a free and easy to operate website building platform.

Why Does WIX Worry Us?

1. 11.5% annual revenue growth over the last three years was slower than its software peers
2. Gross margin of 68.1% reflects its relatively high servicing costs

At $153.96 per share, Wix trades at 4.6x forward price-to-sales. Dive into our free research report to see why there are better opportunities than WIX.

One Software Stock to Watch:

SentinelOne (S)

Market Cap: $5.99 billion

With roots in the Israeli cyber intelligence community, SentinelOne (NYSE: S) provides software to help organizations efficiently detect, prevent, and investigate cyber attacks.

Why Do We Like S?

1. Customers view its software as mission-critical to their operations as its ARR has averaged 28.1% growth over the last year
2. Forecasted revenue growth of 21.4% for the next 12 months indicates its momentum over the last three years is sustainable
3. Free cash flow margin is expected to increase by 7 percentage points next year, suggesting the company will have more capital to invest or return to shareholders

SentinelOne is trading at $18.18 per share, or 5.7x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.