Digitization is driving the software market’s growth. However, advertising software start-up Phunware (PHUN), which is linked to former President Donald Trump, does not look financially fit enough to capitalize on the industry tailwinds. Therefore, we think it could be worth betting instead on software stocks Rimini Street (RMNI), NetSol (NTWK), Evolving Systems (EVOL), and SilverSun (SSNT). These stocks are currently trading at less than $10 but possess strong fundamentals. So, read on.
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A growing dependency on data insights, data storage, and various other cloud-based services by small and large enterprises due in large measure to the continuing remote lifestyle has fueled the software market’s growth. Businesses are spending billions of dollars on software to upgrade and improve their business processes. According to a Gartner report, worldwide public cloud end-user spending is expected to grow 23% in 2021. The global software market is expected to reach $823.71 billion by 2026, registering a 7.2% CAGR.. Investors’ interest in the software industry is evidenced by the iShares Expanded Tech-Software Sector ETF’s (IGV) 22.4% returns over the past six months.
Although shares of advertising software start-up Phunware, Inc. (SPRAY)—which is linked to former President Donald Trump—skyrocketed in price in October due to the Trump-related frenzy on major Reddit forums, its revenues decreased 31% year-over-year to $2.16 million in its last reported quarter. Its gross profit declined 49.2% from its year-ago value to $1.13 million. While the stock gained 290.5% in price over the past three months, it has lost 61.3% over the past month. The stock began retreating after the ex-president detailed his social media plans in October. Considering PHUN’s weak financials, we think the stock is best avoided now.
We think fundamentally sound software stocks Rimini Street, Inc. (RMNI), NetSol Technologies, Inc. (NTWK), Evolving Systems, Inc. (EVOL), and SilverSun Technologies, Inc. (SSNT), which are currently trading at less than $10, could be ideal bets instead to capitalize on the industry’s solid growth prospects.
Click here to check out our Software Industry Report for 2021
Rimini Street, Inc. (RMNI)
RMNI is a Las Vegas-based global provider of enterprise software, products, and services that support various industries. The company offers software support services for Oracle and SAP enterprise software products. Its software support includes application and database management services, security solutions, cloud advisory, and other professional services. RMNI sells its solutions primarily in North America, Latin America, Europe, Africa, the Middle East, Asia, and the Asia-Pacific.
This month, RMNI and DPaschoal Group, an automotive service retail network in Brazil, entered a seven-year agreement to improve DPaschoal’s digital customer service experience. Through this agreement, RMNI should provide operational security and SAP solutions to the DPaschoal Group.
RMNI’s revenue for its fiscal third quarter, ended September 30, 2021, increased 15.9% year-over-year to $95.64 million. The company’s gross profit grew 23.2% from its year-ago value to $62.27 million. Its operating income rose 66% from the prior-year quarter to $7.53 million. Also, the company’s net income came in at $1.93 million during the period.
RMNI’s revenue is expected to increase 13.7% year-over-year to $371.47 million in its fiscal 2021. Its EPS is expected to grow 333.3% in the current quarter and 210.5% next year. The stock has gained 59% in price over the past year to close yesterday’s trading session at $6.79.
RMNI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an A grade for Quality, and a B grade for Value and Growth. We have also graded RMNI for Stability, Sentiment, and Momentum. Click here to access all RMNI’s ratings. RMNI is ranked #4 of 59 stocks in the Software – Business industry.
NetSol Technologies, Inc. (NTWK)
Incorporated in 1997, NTWK provides state-of-the-art solutions, cost-effective capabilities, and consulting services to the global finance and leasing industry. The Calabasas, Calif., company’s software delivers businesses to clients with smart work engines and the freedom to evolve. Self-Point of Sale, Mobile Account, Web Point of Sale, Mobile Field Investigator, and Mobile Auditor are some products under NTWK’s digital segment.
Last month, NTWK signed an agreement to become a “Five-Star Premier Business Partner” of the American Financial Services Association (AFSA), the national trade association for the consumer credit industry in the United States. Through this agreement with AFSA, NTWK believes it will maximize its reach in the consumer finance space and will also benefit AFSA with NTWK’s industry knowledge in both the U.S. and global auto finance and leasing industry.
During its fiscal first quarter, ended September 30, 2021, NTWK’s total net revenues increased 6.1% year-over-year to $13.42 million. The company’s gross profit came in at $5.44 million. Its net income amounted to $550,500. Also, the company’s EPS came in at $0.02 for the period.
Analysts expect NTWK’s revenue to increase 20.2% year-over-year to $66 million in its fiscal 2022. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters. Its EPS is estimated to grow at 28% rate per annum over the next five years. The stock has soared 52.9% in price over the past year to close yesterday’s trading session at $4.42.
NTWK’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has an A grade for Value, and a B grade for Momentum and Quality.
In addition to the POWR Rating grades I have just highlighted, one can see NTWK’s ratings for Stability, Sentiment, and Growth here. NTWK is ranked #18 of 109 stocks in the Software – Application industry.
Evolving Systems, Inc. (EVOL)
Englewood, Colo.-based EVOL is a real-time digital engagement accelerator that empowers Communications Service Providers (CSP) to increase revenue per user, reduce friction, improve retention, and maximize customer satisfaction. The company’s business solutions include marketing services, smart dealer, customer value management, Dynamic SIM Activation, and Tertio Service Activation.
During the third quarter, ended September 30, 2021, EVOL’s total revenue increased 3% year-over-year to $6.97 million. The company’s income from operations grew 43% from its year-ago value to $559,000. Its net income came in at $75,000. Also, the company’s EPS amounted to $0.01 during the period.
EVOL’s EPS is expected to grow at a 15% rate over the next five years. The stock has gained 30.3% in price over the past six months and 34.6% over the past year to close yesterday’s trading session at $2.41.
It is no surprise that EVOL has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has an A grade for Value and Quality.
Click here to see the additional POWR Ratings for EVOL (Sentiment, Stability, Growth, and Momentum). EVOL is ranked #20 in the Software – Application industry.
SilverSun Technologies, Inc. (SSNT)
SSNT is a business application, technology, and consulting company. The East Hanover, N.J., company provides transformative business management solutions, technologies, and professional consulting services to small- and medium-sized businesses in the manufacturing and service industries. In addition, the company provides cybersecurity, disaster recovery, data backup, and application hosting services.
This month, SWK Technologies, Inc., a subsidiary of SSNT, acquired the Acumatica division of Dynamic Tech Services, Inc., an Atlanta-based reseller of Acumatica ERP software solutions. The company believes that through this acquisition, SSNT’s Acumatica customer base should increase by 30% and that SSNT will be onboarding experienced res to scale its business further. Also, SSNT should expand its cloud practices with this acquisition.
SSNT’s revenues came in at $10.11 million during the third quarter, ended September 30, 2021. The company’s gross profit amounted to $3.94 million.
SSNT’s shares have gained 77.3% in price year-to-date and 71.9% over the past year to close yesterday’s trading session at $5.07.
SSNT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an A grade for Momentum, and a B grade for Quality. We have also graded SSNT for Stability, Sentiment, Growth, and Value. Click here to access all SSNT’s ratings. SSNT is ranked #13 in the Software – Business industry.
Click here to check out our Software Industry Report for 2021
RMNI shares were trading at $6.79 per share on Tuesday morning, down $0.11 (-1.59%). Year-to-date, RMNI has gained 53.27%, versus a 26.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master’s degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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