The software industry will continue to grow despite the economic downturn, thanks to the demand for digital business and automation technologies. It may be worthwhile to buy fundamentally sound stocks such as Salesforce (CRM), PDF Solutions (PDFS), and other companies with high growth potential. Our proprietary rating system gives these stocks a B (Buy). Continue reading.
The software industry will remain stable despite economic challenges. The industry is also growing due to the increasing demand for software, and services related to it, as a result of the adoption of digital business initiatives.
It could be a good idea to invest in Salesforce, Inc., (CRM), and PDF Solutions, Inc., (PDFS), both of which have a high growth potential. These stocks are rated as B, which translates to a Buy according to our proprietary rating system.
Recent economic data show that prices have cooled down after months of high levels of inflation. Consumer and producer prices are at their lowest levels since beginning of pandemic crisis.
The Fed may be able to pivot away from its year-long tightening of monetary policy due to the cooling of inflationary pressures, but it has also increased tensions in the economy.
Brian Moynihan, CEO of Bank of America, predicts that the United States will be in a recession by the end of this year. Moynihan predicted that the US economy would contract by 0.5% to 1% each quarter, which would result in a "very slight recession" in the grand scheme of things.
The software industry is still growing. This year, the demand for software is expected to grow as businesses push ahead with digital business initiatives.
Gartner's latest forecast predicts that worldwide IT spending will increase 5.1% this year, to $4.60 trillion.
According to Deloitte’s Global Intelligent Automation Survey 2022, organizations are increasingly adopting intelligent automation technologies such as RPA, optical characters recognition, AI and low-code tools to achieve broad benefits, which include improved productivity and accuracy, better customer service, and cost savings.
Check out the stocks listed above:
Salesforce, Inc. (CRM)
CRM is a technology for managing customer relationships that connects companies and their customers worldwide.
The company offers two service offerings: Sales, which stores data, monitors leads and progress, forecasts opportunities, gains insights through analytics and relationships intelligence, delivers quotes, contracts and invoices, and Service, which enables companies deliver highly personalized and trusted customer service at scale.
CRM announced on March 29 that The RealReal, Inc., a leading online marketplace of resale luxurious goods, has optimized and streamlined their overall consignor journey and shopper experience with CRM, creating an intuitive, fully-personalized digital selling and buying experience. This should increase CRM's bottom line.
CRM launched Einstein GPT on March 7th, the world's first generative AI CRM. It offers AI-generated material to enhance interactions in various areas such as sales and service, marketing, commerce, IT, and more. By implementing Einstein GPT, Salesforce aims to revolutionize every customer experience using generative AI.
CRM's revenues grew at a rate of CAGR 22.4% in the last three years. Its total assets have also grown at a CAGR 5% in the last five years.
The EBIT margin for the trailing 12 months is 5.93%, which is 30.8% more than the industry average of 4.53%. Its gross profit margin for the trailing 12 months is 73.34%, which is 45.1% more than the industry average of 50.54%.
CRM's total revenue increased by 14.4% over the previous year to $8.38 Billion in its fiscal fourth quarter that ended on January 31, 2023. Its gross profits increased by 18.3% over the past year to $6.28 Billion. The income from operations was $357 million compared to $176 million loss in the prior-year quarter.
The non-GAAP net profit of the company increased by 96.4% over the past year to $1.66 Billion. The company's non-GAAP earnings per share increased by 100% to $1.68.
CRM's revenue for the first fiscal quarter ending April 2023 is expected to increase 10.2% over last year to $8.16 Billion. The company's earnings per share (EPS) for the same period is expected to rise 64.4% over the past year to $1.61. The stock also exceeded consensus revenue and EPS estimates for each of the last four quarters.
It has gained 36.5% in the last three months, closing the last trading day at $198.50. The stock has gained 49.7% in the past year.
The POWR ratings of CRM reflect the positive outlook. The stock is rated B overall, which in our rating system translates into a Buy. The POWR ratings are calculated using 118 factors. Each factor is weighted optimally.
CRM has also been given an A for Growth, Sentiment, and Quality. It is ranked #14 out of 135 stocks within the Software-Application industry.
Click here for additional ratings of CRM's Value Stability and Momentum.
PDFS offers proprietary software, physical intellectual property, electrical measurement hardware, proven methodologies and professional services to the United States, China and Japan.
PDFS and Voltaiq jointly announced on March 9 that they would be working together to improve battery yields, reduce costs, and speed up the ramp-up of new factories.
This collaboration brings together PDFS's expertise in semiconductor and electronic manufacturing, as well as Voltaiq’s expertise in analyzing and controlling large data sets from the entire battery product lifecycle. The goal is to optimize battery production and development by accelerating the process.
PDFS revenue has grown at a CAGR 20.2% in the last three years. EBITDA has also grown at a CAGR 5.2% in the last five years.
The industry average gross profit margin is 50.54%.
PDFS's revenues increased by 35.6% over the previous year to $40.52 millions in its fiscal fourth quarter that ended December 31, 2020. The company's net income, calculated without using GAAP, increased by 164% to $7.40million. Non-GAAP earnings per share also rose by 171.4% to $0.19.
Analysts predict that PDFS revenue will increase 19.1% over the previous year to $39.88 millions for the first fiscal quarter ending March 2023. For the same quarter, analysts expect the company's earnings per share to rise 58.3% over last year to $0.14. The stock's EPS and revenues have exceeded consensus estimates for each of the past four quarters.
The stock closed the last trading session at 40.81, an increase of 85.8% in the last six months. The stock has also gained 43.1% in the past year.
The strong fundamentals of PDFS are reflected by its POWR ratings. The stock is rated B in our proprietary system, which equates to a buy.
PDFS has also been given an A for Growth, Sentiment, and Quality. It is ranked #12 in the same industry.
Click here to access PDFS's additional ratings of Stability, Value and Momentum.
We are still in a bearish market.
Some stocks, like those discussed in this article, may rise. Most will fall as the bear markets claws lower and lower.
Steve Reitmeister, a 40-year investment veteran, has just released the "REVISED:2023 Stock Market Outlook". He explains it as follows:
This presentation is timely and you owe yourself to view it before making your next trade.
On Wednesday morning, CRM shares traded at $197.82 each. This is a $0.68 decrease (-0.34%). CRM shares have gained 49.20% year-to-date compared to the benchmark S&P 500 index which has risen 8.46%.
Nidhi Aggarwal is the author.
Nidhi's passion for the capital markets and wealth management led her to pursue an investment analyst career. She has a Bachelor's in Finance and Marketing and is currently pursuing the CFA Program. Her fundamental approach in analyzing stocks can help investors identify the best investments.