Software is rapidly reducing operating expenses for businesses. In the past, the undeniable tailwinds fueling SaaS companies led to lofty valuation multiples that made it easier to raise capital. But this was a double-edged sword as the high prices exposed them to big drawdowns, and unfortunately, the industry has tumbled by 6.9% over the last six months. This drop was disappointing since the S&P 500 held steady.

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. On that note, here are two software stocks we think can generate sustainable market-beating returns and one best left ignored.

One SoftwareStock to Sell:

Paylocity (PCTY)

Market Cap: $9.82 billion

Founded by payroll software veteran Steve Sarowitz in 1997, Paylocity (NASDAQ: PCTY) is a provider of payroll and HR software for small and medium-sized enterprises.

Why Are We Hesitant About PCTY?

1. Estimated sales growth of 8.3% for the next 12 months implies demand will slow from its three-year trend
2. Gross margin of 68.8% is below its competitors, leaving less money to invest in areas like marketing and R&D

Paylocity’s stock price of $175.26 implies a valuation ratio of 6x forward price-to-sales. If you’re considering PCTY for your portfolio, see our FREE research report to learn more.

Two Software Stocks to Watch:

Atlassian (TEAM)

Market Cap: $50.6 billion

Founded by Australian co-CEOs Mike Cannon-Brookes and Scott Farquhar in 2002, Atlassian (NASDAQ: TEAM) provides software as a service that makes it easier for large teams of software developers to manage projects, especially in software development.

Why Will TEAM Beat the Market?

1. Average billings growth of 14.7% over the last year enhances its liquidity and shows there is steady demand for its products
2. Software platform has product-market fit given the rapid recovery of its customer acquisition costs
3. Strong free cash flow margin of 29.6% enables it to reinvest or return capital consistently

Atlassian is trading at $196.31 per share, or 8.6x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.

Veeva Systems (VEEV)

Market Cap: $45.8 billion

Built on top of Salesforce as one of the first vertical-focused cloud platforms, Veeva (NYSE: VEEV) provides data and customer relationship management (CRM) software for organizations in the life sciences industry.

Why Is VEEV Interesting?

1. Billings have averaged 14.6% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
2. Highly efficient business model is illustrated by its impressive 27% operating margin, and its rise over the last year was fueled by some leverage on its fixed costs
3. Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends

At $280.30 per share, Veeva Systems trades at 14.6x forward price-to-sales. Is now the time to initiate a position? See for yourself in our in-depth 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 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