The software industry is growing with investments in digital transformations. Additionally, integrating Artificial Intelligence (AI) within software applications unlocks new possibilities. Thus, it could be wise to scoop the shares of SS&C Technologies Holdings, Inc. (SSNC), Nutanix, Inc. (NTNX), and Progress Software Corporation (PRGS), which are gaining popularity among investors.
The exponential growth in enterprise data volume necessitates robust software solutions and services to handle and analyze this data effectively. Additionally, the increasing automation of business processes across various industries, including retail, manufacturing, healthcare, and transportation, creates a need for advanced software tools and services.
The global market for business software and services achieved a value of $474.61 billion in 2022, and it is projected to exhibit a CAGR of 11.9% from 2023 to 2030. Two factors primarily fuel the escalating demand for business software and services.
Furthermore, the global market for AI software is projected to exceed $1.09 trillion by 2032, exhibiting a CAGR of 22.9% from 2023 to 2032. The increased adoption and integration of AI across industries is propelling the market’s growth due to its ability to offer advanced analytics, automation, machine learning, and natural language processing capabilities,
Given the aforementioned factors, the software industry exhibits promising long-term growth prospects. With that being said, let us dig deeper into the fundamental aspects of the featured stocks to get a better perspective on them.
SS&C Technologies Holdings, Inc. (SSNC)
SSNC provides software products and software-enabled services to financial services and healthcare industries. The company's software-enabled services include SS&C GlobeOp, Global Investor and Distribution Solutions, Bluedoor, SS&C Retirement Solutions, Black Diamond Wealth Platform, CRM Solutions, Advent Managed Services, Advent Data Solutions, and Virtual Data Rooms.
On June 15, SSNC paid its shareholders a quarterly dividend of $0.20 per share. The company’s annual dividend of $0.80 translates to a 1.35% yield on the prevailing prices, while its four-year average dividend yield is 0.98%. Its dividend payouts have grown at CAGRs of 18.9% and 23.4% over the past three and five years, respectively.
In the same month, SSNC revealed that over 150 clients have adopted its Trade Matching & Settlements Service to facilitate post-trade execution activities. This surge in adoption coincides with the preparation of the US funds industry for the reduction of trade settlement cycles to T+1 by 2024.
Guy Fiumarelli, the COO and Head of Operations at Itaú USA Asset Management Inc., said utilizing SSNC’s Trade Matching & Settlements Service has empowered them to consistently fulfill their trade settlement commitments within the shortest feasible timeframe.
SSNC’s total revenues increased 5.2% year-over-year to $1.36 billion for the first quarter (ended March 31, 2023), while its gross profit rose 2.8% from the year-ago value to $637 million. The company’s attributable adjusted net income and EPS amounted to $284.40 million and $1.11 for the same period, respectively. Also, its adjusted EBITDA came in at $509.60 million in the same period.
The consensus EPS estimate of $1.12 for the second quarter (ending June 30, 2023) indicates a marginal growth year-over-year. The consensus revenue estimate of $1.36 billion for the current quarter represents a 2.1% increase from the same period last year.
Additionally, SSNC’s revenue and EBIT have grown at CAGRs of 4.7% and 6.5% over the past three years, respectively, while its net income and EPS have increased at CAGRs of 9.8% and 10.7% over the same period, respectively.
SSNC’s shares have gained 15.1% over the past six months to close the last trading session at $59.08.
SSNC’s POWR Ratings reflect this robust outlook. The stock has an overall A rating, translating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth, Value, Stability, and Sentiment. In the 135-stock Software - Application industry, it is ranked #7. To see additional ratings of SSNC for Momentum and Quality, click here.
Nutanix, Inc. (NTNX)
NTNX is engaged in providing an enterprise cloud platform. The company offers a hyper-converged infrastructure software stack that converts virtualization, storage, and networking services into a turnkey solution, Acropolis Hypervisor, flow virtual networking and flow network security, automating common network operations, building virtual private networks, etc.
On May 9, NTNX unveiled Nutanix Central, a cloud-based solution that offers a unified console for enhanced visibility, monitoring, and management across various environments such as public cloud, on-premises infrastructure, hosted infrastructure, and edge infrastructure.
This new offering aims to expand the universal cloud operating model of the Nutanix Cloud Platform, eliminating barriers and streamlining the management of applications and data across diverse locations.
On the same day, NTNX introduced Project Beacon. This long-term initiative aims to provide a range of data-centric Platform as a Service (PaaS) level services that can be accessed natively across various environments, including Nutanix infrastructure and native public cloud platforms.
By envisioning the separation of applications and their data from the underlying infrastructure, Project Beacon intends to empower developers to construct applications once and execute them seamlessly in any location.
For the fiscal 2023 third quarter that ended April 30, 2023, NTNX’s total revenues increased 11.1% year-over-year to $448.58 million, while its gross profit rose 13.1% from the year-ago value to $366.15 million. The company’s non-GAAP operating income stood at $17.20 million compared to a non-GAAP operating loss of $5.80 million in the same period last year.
During the same period, its cash and cash equivalents and total current assets amounted to $439.92 million and $1.73 billion, up 9.2% and 4.3% versus $402.85 million and $1.66 billion as of July 31, 2022, respectively.
Street expects NTNX’s revenue for the fourth quarter (ending July 31, 2023) to increase 23.3% year-over-year to $475.27 million. Its EPS for the ongoing quarter is expected to be $0.16. Moreover, the company topped the EPS and revenue estimates in each of the trailing four quarters, which is impressive.
Its revenue has grown at CAGRs of 11.1% and 9.7% over the past three and five years, respectively, while its total assets have improved at a CAGR of 10.6% over the past three years.
Over the past year, the stock has gained 95.7% to close the last trading session at $28.39.
NTNX’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has a B grade for Growth, Sentiment, and Quality. Within the same industry, it is ranked #10. Click here to see NTNX’s ratings for Value, Momentum, and Stability.
Progress Software Corporation (PRGS)
PRGS develops, deploys, and manages business applications. OpenEdge, Sitefinity, Kemp LoadMaster, Developer Tools, and DataDirect Connect are some of the company's applications. It sells its products to end users, independent software vendors, original equipment manufacturers, and system integrators.
On June 14, PRGS introduced the R2 2023 release of Progress® Telerik® and Progress® Kendo UI®. These industry-leading libraries and tools for .NET and JavaScript empower developers to create robust applications efficiently. By equipping developers with these advanced resources, PRGS aims to enable businesses to deliver exceptional digital experiences that give them a competitive advantage.
On February 7, PRGS acquired MarkLogic, a leader in complex data and semantic metadata management, and a Vector Capital portfolio company. PRGS’s CEO, Yogesh Gupta, believes the acquisition aligns with PRGS’ ‘Total Growth Strategy,’ enriching its existing portfolio with top-tier products and contributes substantially to its revenue growth.
PRGS’ total revenue for the first quarter (ended February 28, 2023) increased 13.3% year-over-year to $164.23 million, while its gross profit grew 13.4% from the prior-year quarter to $138.01 million.
The company’s non-GAAP net income and EPS increased 21.1% and 22.7% from the year-ago value to $52.76 million and $1.19, respectively. Also, its non-GAAP income from operations came in at $72.43 million, representing a 23.3% rise from the prior-year period.
Analysts expect PRGS’ revenue for the second quarter (ended May 31, 2023) to increase 12.5% year-over-year to $169.78 million. Its EPS for the same period is expected to be $0.90. Additionally, Its EPS is expected to improve by 2% per annum over the next five years.
The company has an excellent earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
Over the past three years, PRGS’ revenue, EBITDA, and net income have grown at CAGRs of 12.8%, 14.9%, and 37.1%, respectively. Likewise, it's EPS and total assets have improved at CAGRs of 38.8% and 22.7% over the same period, respectively.
The stock has gained 32.9% over the past nine months to close the last trading session at $57.43.
It’s no surprise that PRGS has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has a B grade for Quality. Out of 135 stocks in the same industry, it is ranked #9.
In addition to the POWR Ratings we’ve stated above, we also have PRGS ratings for Growth, Value, Momentum, Stability, and Sentiment. Get all PRGS ratings here.
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SSNC shares were trading at $58.54 per share on Thursday morning, down $0.54 (-0.91%). Year-to-date, SSNC has gained 13.24%, versus a 14.75% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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