2 Cheap Software Stocks Down Over 30% To Buy Now
Software stocks have been among the hardest hit during the recent market correction due to inflationary concerns, rising interest rates, semiconductor shortages and the geopolitical crisis due to the invasion of Ukraine by Russia. As a result, market volatility has increased significantly and the CBOE Volatility Index has jumped 31.8% over the past three months. Due to prevailing fears in the market, investors began to flee from technology growth stocks. The sell-off in tech stocks sent U.S. stock indexes plummeting. The tech-focused NASDAQ Composite Index is down 13% year-to-date.
However, many software stocks are now undervalued and show promising long-term growth prospects. These stocks are expected to rally in the coming months, making this a great time to buy them at a discount.
Today I’m going to take a look at two cheap software stocks: Informatica Inc. (INFA) and ChannelAdvisor Corporation (ECOM).
Click here to view our Software Industry Report for 2022
Informatica Inc. (INFA)
INFA has developed an AI-powered platform that connects and manages data across enterprise-scale multi-cloud hybrid systems in the United States. The Company’s product portfolio includes data integration products, API and application integration products, data management products, Business 360 products and data catalog products. In addition, INFA provides maintenance and professional services.
In February, INFA expanded its partnership with Wipro Limited (SPIRIT), a leading company in the field of business process services, to support the digital transformation of its customers. This partnership covers common solutions including automated cloud modernization, multi-cloud master data management, automated data integration, and real-time intelligence with analytics.
During the fourth quarter of fiscal 2021 ended December 31, 2021, INFA’s total revenue increased 8% year over year to $406.71 million. INFA’s gross profit increased 6.2% year over year to $311.92 million. The company’s net profit rose 6% from the prior year period to $54.01 million.
INFA is relatively undervalued compared to its peers. In terms of price/pound futures, INFA is currently trading at 2.46x, 48.7% below the industry average of 4.80x. Its forward price/sales multiple of 3.16 is slightly below the industry average of 3.19x.
The consensus revenue estimate of $1.60 billion for fiscal 2022 ending December 2022 represents a 10.7% year-over-year growth from last year 2021.
The stock has fallen 50.9% since the start of the year and 49.6% over the past three months. It closed yesterday’s trading session at $18.15.
INFA POWR Rankings reflect this promising prospect. The stock has an overall rating of B, which translates to Buy in our proprietary system. POWR ratings rate stocks on 118 different factors, each with its own weighting.
INFA has a B rating for value and growth. Within the Software – SAAS industry, it is ranked #4 out of 24 stocks.
To view additional POWR (momentum, stability, quality, and sentiment) ratings for INFA, Click here.
ChannelAdvisor Corporation (ECOM)
ECOM offers software-as-a-service (SaaS) solutions in the United States and internationally. The company’s SaaS cloud platform helps brands and retailers improve their e-commerce operations, expand into new channels and increase sales. ECOM’s suite of solutions includes a Marketplaces Module, a Digital Marketing Module, a Buyable Media Module and a Brand Analytics Module. It serves customers, online businesses, retailers, and advertising agencies.
Last October, ECOM’s multi-channel commerce platform included seller solutions under the Amazon Local Selling program to help sellers grow their businesses. Sellers can manage the in-store pickup experience with the new solutions. This should expand ECOM’s customer base and increase profitability.
ECOM’s revenue increased 12.7% year-over-year to $45.45 million during the fourth quarter of Fiscal 2021 ended December 31, 2021. Its gross profit improved 10.5% year over year to $35.33 million. ECOM’s operating income increased 8.7% year over year to $9.76 million. Its adjusted EBITDA increased slightly from the previous year’s value to $11.17 million. The company’s net profit rose 450.1% year-over-year to $33.67 million. Its net earnings per share rose 430% year over year to $1.06.
ECOM is trading at a discount to its peers. In terms of forward EV/EBITDA, ECOM is currently trading at 10.37x, 19% below the industry average of 12.80x. Its price-to-forward multiple of 2.73 is 14.2% below the industry average of 3.19x. ECOM’s EV to Sales forecast ratio of 2.10 vs. industry average of 3.07.
Analysts expect ECOM’s revenue for the first quarter of fiscal 2022 ending March 2022 to be $42.08 million, a 7.4% year-over-year increase on the other. The company has an impressive track record of earnings surprises, as it beat consensus EPS estimates in each of the last four quarters.
ECOM shares have fallen 32.9% since the start of the year. ECOM closed yesterday’s trading session at $16.57.
ECOM’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which is equivalent to Buy in our proprietary rating system.
It has an A rating for Sentiment. It has a B rating for value and quality. Within the Software app industry, it is ranked No. 17 out of 163 stocks.
To view additional component ratings of POWR (Growth, Stability, and Dynamics) ratings for ECOM, Click here.
INFA shares remained unchanged in after-hours trading on Thursday. Year-to-date, INFA is down -49.35%, compared to a -7.14% rise in the benchmark S&P 500 over the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using its fundamental approach to stock analysis, Mangeet seeks to help retail investors understand the underlying factors before making investment decisions. Continued…