More and more in our daily lives, the world around us continues to be technology driven and software based, and whether it’s a mega-cap leaders or a smaller, more nimble company, the key for investors looking at software stocks is solid top-line growth that is sustained over a several years. This is especially true after a company comes out after an initial public offering with high expectations.
In a new report, the software team at SunTrust notes some recent ambitious sales growth goals that were set forth by a company they cover. So the firm started looking for other companies that can sustain 30% plus top-line growth for five years, and the report said this:
We were intrigued by several findings. First it’s a relatively small, or shall we say exclusive, group of software companies that have sustained 30% or more top-line growth for five years or more after going public. In fact, we count only 14 companies that have achieved this feat. Three of which are companies we cover.
Two of those stocks are rated Buy and two others rated Buy were highlighted in the report. All are solid picks for aggressive growth accounts with higher risk tolerance.
This is recognized as a leader in what is called sourcing applications. Coupa Software Inc. (NASDAQ: COUP) provides a unified, cloud-based spend management platform that connects organizations with suppliers globally. The company offers spend management cloud applications that are pre-integrated. The platform offers consumerized financial applications.
The Coupa Software platform offers consumerized financial applications. Its spend management suite includes procurement, invoicing, expenses, sourcing, inventory, contract lifecycle management, budgeting, analytics, open business network, supplier information management and storefront.
The platform offers features, such as procure-to-pay solution; online invoice management, and inventory management and tracking software system. Its solutions for business needs include financial compliance and mobile productivity. The company’s solutions for enterprise resource planning include Oracle and NetSuite. Coupa offers solutions for industries, including financial, health care, oil and gas, retail, technology, and food and beverage.
The SunTrust price target for the shares is $86, and the Wall Street consensus target is $82.36. Shares closed trading on Monday at $60.36 apiece.
This stock has been hit hard over the past two months and offers a solid entry point now. HubSpot Inc. (NYSE: HUBS) is a cloud-based provider of inbound marketing tools such as website content management, blogging tools, email campaign, search engine optimization, social media monitoring and management, customer relationship management and others for small businesses and mid-sized companies.
The company’s tools provide a single console for marketing professionals to generate new customer leads, convert leads to customers and customers to repeat customers.
This is a top technology holding among the managers in the survey, and a Jefferies report notes that 39.5% of those surveyed own shares in their portfolios.
SunTrust has a price target of $160, and the consensus target is $155.41. HubSpot closed below those levels on Monday at $129.16, down almost 5% on the day.
While probably not a household name, this company could be a target of private equity. Okta Inc. (NASDAQ: OKTA) is an independent provider of identity for the enterprise. Its Okta Identity Cloud platform provides identity management solutions that enable customers to secure their users and connect them to technology and applications. It also connects enterprises to their customers, employees, contractors and partners.
The products allow users to access a range of cloud applications, websites, mobile applications and service from various devices. Its platform is used by information technology (IT) organizations to secure their enterprise and by developers to build customer-facing websites and applications.
Okta Identity Cloud consists of a suite of products to manage and secure identities. It offers a range of products, such as Adaptive Multi-Factor Authentication, Universal Directory, Lifecycle Management products, Single Sign-On, application program interface Access Management and Mobility Management.
The $72 SunTrust price target compares with the $76.54 consensus target. The stock closed most recently at $54.62, down almost 8% on the day.
This smaller cap company could be a great takeover target. RingCentral Inc. (NYSE: RNG) offers a cloud-based solution for business communications that replaces legacy and expensive on-premise communications systems. It is delivered as an application that follows the user regardless of device (office phone, smartphone, desktop, tablet). Features include voice, text, fax, audio conferencing and integration with document and customer relationship management systems.
For some time the SunTrust analysts have felt the company has multiple catalysts, including continued traction with mid/enterprise customers, increased partner traction, international expansion and continued dislocation in the industry from legacy PBX/UC vendors.
SunTrust has set its price target at $100. The consensus target is $95.60, but shares closed below both targets at $75.45.
These four stocks to buy with solid growth potential have been battered this fall due to the intense selling in the markets. Volatility could remain through the month, so it may make sense to scale-buy shares and see how the overall markets act, as typically we see things trade higher near the end of the year.