The software market has been experiencing significant growth worldwide due to the increasing demand for digital transformation across various industries. So, investors could buy software stocks, Yalla Group Limited (YALA), Yext, Inc. (YEXT), and OppFi Inc. (OPFI), to ignite their portfolio.
The global business software and services industry is being boosted by the increasing deployment of business software in various organizations and government sectors. The market is driven by the benefits it provides, which include increased profitability, lower inventory costs, and the capacity to make strategic decisions.
The global business software and services market is poised to grow at a CAGR of 11.4% until 2032.
Furthermore, the application development market is projected to grow at a CAGR of 38.2% until 2030. Boosted by the desire for scalable and customized software and rising demand for cloud deployment among a variety of enterprises, the market is expected to continue to grow over the coming years.
In addition, the global edge AI software market is expected to reach $8.05 billion by 2027, growing at a CAGR of 35.9% due to real-time data processing demand and the adoption of edge computing technology. Edge AI software refers to the use of artificial intelligence algorithms on edge devices for faster and more efficient data processing.
Considering these conducive trends, let's take a look at the fundamentals of the three best software stocks.
Yalla Group Limited (YALA)
Based in Dubai, the United Arab Emirates, YALA operates a social networking and entertainment platform primarily in the Middle East and North Africa region. It provides mobile applications, including Yalla, a voice-centric group chat platform; and Yalla Ludo, a casual gaming application.
YALA’s trailing-12-month ROCE of 21.38% is 453.3% higher than the 3.86% industry average. Its trailing-12-month ROTA of 16.88% is significantly higher than the industry average of 1.49%.
In the third quarter, which ended September 30, 2023, YALA’s revenues grew 6.4% year-over-year to $85.19 million. The company generated non-GAAP operating income and net income of $35.45 million and $38.28 million, up 20.4% and 30.3% from the previous-year quarter, respectively. Moreover, its non-GAAP EPS rose 23.5% from the prior-year quarter to $0.21.
Street expects YALA’s revenue to increase 5.6% year-over-year to $335.4 million for the fiscal year ending December 2024. Its EPS is expected come in at $0.74 for the same year. It surpassed revenue estimates in all the four trailing quarters, which is impressive.
Shares of YALA have gained 30.7% over past nine months to close the last trading session at $4.85.
YALA’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
YALA has a B grade for Quality, Sentiment and Value. It is ranked #6 out of 131 stocks in the Software - Application industry.
Click here to see the additional POWR Ratings for YALA (Momentum, Stability, and Growth).
Yext, Inc. (YEXT)
YEXT offers a cloud-based platform enabling businesses to control and update their information across various online platforms, helping them answer consumer questions and manage online reviews. The company primarily serves the healthcare, retail, and financial services industries.
YEXT’s trailing-12-month gross profit margin of 77.22% is 58.7% higher than the industry average of 48.91%. Its trailing-12-month levered FCF margin of 14.60% is 62.9% higher than the industry average of 8.96%.
During the fiscal 2024 third quarter that ended October 31, 2023, YEXT’s revenue increased marginally year-over-year to $101.16 million. Its adjusted EBITDA grew 90.7% from the year-ago quarter to $13.51 million.
Furthermore, YEXT’s non-GAAP net income attributable to common stockholders stood at $11.29 million and $0.09 per share up 349.4% and 350% year-over-year, respectively.
The consensus revenue estimate of $403.44 million for the year ending January 2024 represents a marginal increase year-over-year. Its EPS is expected to come in at $0.30 for the same year.
YEXT’s shares have lost 8.5% over the past month to close the last trading session at $6.30.
YEXT’s POWR Ratings reflect its positive outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and a B in Sentiment, Value and Quality. The stock is ranked #3 out of 43 stocks in the B-rated Software - Business industry.
Beyond what is stated above, we’ve also rated for Stability and Momentum. Get all YEXT ratings here.
OppFi Inc. (OPFI)
OPFI operates a financial technology platform that allows banks to offer lending products. Its platform facilitates the OppLoans, an installment loan product; SalaryTap, a payroll deduction secured installment loan product; and OppFi Card, a credit card product.
In terms of the trailing-12-month gross profit margin, OPFI’s 100% is 70.5% higher than the 58.67% industry average. Likewise, its 188.4% trailing-12-month ROCE is significantly higher than the 10.76% industry average.
OPFI’s net revenue for the third quarter that ended September 30, 2023, rose 7.2% year-over-year to $133.17 million. Its adjusted EBITDA rose 149.8% over the prior-year quarter to $33.01 million. The company’s adjusted net income and EPS rose significantly over the prior year quarter to $13.78 million and $0.16, respectively.
OPFI’s revenue is expected to increase 9.3% year-over-year to $558.30 million for the year ending December 2024. Its EPS is expected to grow 35.1% year-over-year to $0.66 for the same year. It surpassed the consensus revenue estimates in each of the trailing four quarters.
The stock gained 44.6% over the past six months to close the last trading session at $3.24.
OPFI’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
The stock has an A grade for Growth and Sentiment and a B in Quality. It is ranked #21 in the 131-stock in the Software - Application industry.
To access OPFI’s additional ratings for Stability, Value, and Momentum, Click here.
What To Do Next?
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YALA shares were trading at $4.85 per share on Monday afternoon, down $0.00 (0.00%). Year-to-date, YALA has declined -20.88%, versus a 5.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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