The software industry has been at the forefront of technological innovation over the last 19 months in facilitating remote working and the digital transformation of almost every industry globally. While solid progress on the vaccination front paves the way for employees to return to offices, the remote or hybrid working trend will likely continue for the foreseeable future. Slack Technologies CEO Stewart Butterfield noted that “Nobody would choose office over software.”
With the highly contagious COVID-19 Delta variant affecting even vaccinated people, many industry leaders have pushed back their office reopening dates. So, the software industry should continue thriving, at least in the near term.
Also, we think that with favorable investor sentiment surrounding tech stocks, shares of small-cap software companies Progress Software Corporation (PRGS), QAD Inc. (QADA), and Magic Software Enterprises Ltd. (MGIC) should witness solid upside in the near term.
Progress Software Corporation (PRGS)
With a $1.98 billion market capitalization, Bedford, Mass.-based PRGS is a global software company that develops and markets business applications for rapid application development, broad data integration, and efficient data analysis. The company sells its products to end-users, independent software vendors, original equipment manufacturers, and system integrators.
PRGS released the 2021 Progress Telerik Test Studio, the enterprise U.I. test automation platform, on July 27, 2021. The product decreases app deployment time through new features and enhancements to efficiently identify and fix test failures. To help testers modernize their test automation initiatives and meet their testing needs across the latest technologies and frameworks, PRGS also introduced support for .NET 5, .NET Core, and .NET 6 Preview to extend the coverage of WPF application testing as well as flexible license management for enterprise customers. These introductions should drive PRGS’ widespread recognition across the industry.
On July 13, PRGS announced the availability of Progress MOVEit Cloud, the first enterprise-class, cloud-based, Managed File Transfer (MFT) software, via Microsoft’s (MSFT) Microsoft Azure in the U.K. and Australia. An increase in cybersecurity threats, data sovereignty laws, and the COVID-19 pandemic have been motivating businesses to shift their MFT to the cloud to achieve data security compliance and lower latency during file transfer. Offering an easy-to-use and secure cloud service should enable PRGS to generate high demand in the coming months.
PRGS’ non-GAAP revenue for its fiscal second quarter, ended May 31, 2021, increased 26% year-over-year to $129.20 million. The company’s gross profit came in at $103.18 million, up 19.8% from its year-ago period. Its non-GAAP income from operations has been reported at $49.71 million, representing a 25.6% increase from the prior-year period. PRGS’ non-GAAP net income came in at $36.51 million, representing a 27.4% year-over-year improvement. Its non-GAAP EPS increased 30.2% year-over-year to $0.82. The company had $357.36 million in cash and cash equivalents as of May 31, 2021.
Analysts expect the stock’s EPS to increase 5.6% for the current quarter, ending August 31, 2021, to $0.82. PRGS surpassed the Street’s EPS estimates in each of the trailing four quarters. The $131.07 million consensus revenue estimate for the current quarter represents an 18.2% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 10% rate per annum over the next five years.
The stock has gained 25.4% over the past nine months and 4.4% over the past three months. It closed yesterday’s trading session at $45.16.
PRGS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Quality, and a B grade for Value. We also have graded PRGS for Growth, Sentiment, Momentum, and Stability. Click here to access all PRGS ratings.
PRGS is ranked #5 of 138 stocks in the Software - Application industry.
QAD Inc. (QADA)
With a $1.82 billion market cap, Santa Barbara, Calif.-based QADA provides cloud-based enterprise software solutions for global manufacturing companies across the automotive, life sciences, consumer products, food and beverage, high technology, and industrial products industries. The company markets its products through direct and indirect sales channels and distributors and sales agents.
On June 9, 2021, QADA signed a system integrator agreement with J.K. Tech, an I.T. consulting company, in which J.K. Tech will implement the QADA Adaptive Applications portfolio of solutions. J.K. Tech’s technology and business expertise and deep knowledge in QADA will benefit its customers as they navigate a business climate that is being disrupted by a wide range of factors.
In an announcement dated June 8, full-electric commercial vehicle manufacturer Volta Trucks said it will implement QADA Adaptive ERP and other QADA Adaptive Applications solutions. Because the automotive market is in a major transition from an internal combustion engine ecosystem to a zero-emission ecosystem, with battery vehicles playing a major role, helping Volta trucks will enable QADA to capitalize on the industry tailwinds.
For its fiscal first quarter, ended April 30, 2021, QADA’s total revenues came in at $82.97 million, representing an 11.9% rise from the prior-year period. The company’s gross profit increased 16.9% year-over-year to $48.78 million. Its non-GAAP pre-tax income has been reported at $4.63 million for the quarter, up 39.8% from the prior-year period. QADA’s net income came in at $1.83 million, versus a $410,000 loss in the year-ago period. Its EPS has been reported at $0.09, compared to a $0.02 loss in the prior-year period. The company had $153.13 million in cash and cash equivalents as of April 30, 2021.
For the current year, analysts expect QADA’s revenue to be $81.97 million, representing a 6.9% rise from the prior-year period. The stock has surpassed consensus EPS estimates in each of the trailing four quarters. Analysts expect QADA’s EPS to grow at a 10% rate per annum over the next five years. QADA has rallied 106.2% over the past nine months and 22.9% over the past three months. It ended yesterday’s trading session at $86.84.
It’s no surprise that QADA has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
The stock has an A grade for Growth and Quality, and a B grade for Stability and Sentiment. Click here to see the additional ratings for QADA (Value and Momentum).
QADA is ranked #3 in the Software - Application industry.
Magic Software Enterprises Ltd. (MGIC)
Based in Israel, MGIC provides proprietary application development, business process integration, vertical software solutions, and information technologies outsourcing services internationally. It serves the oil and gas, telecommunications, financial, healthcare, and industrial sectors, public institutions, and international agencies. It has an $854.03 million market cap value.
In an announcement dated June 28, Aplix, Inc., one of the world’s leading suppliers of hook and loop fastening solutions, said it will implement MGIC’s FactoryEye Industry 4.0 solution into its two U.S. production facilities near Charlotte, N.C. MGIC is looking forward to a long-term partnership by providing an efficient platform to increase Aplix’s productivity and continually improve its manufacturing processes.
On May 6, MGIC’s FactoryEye partnered with JDEMart, the largest online marketplace of JD Edwards solutions from vendors worldwide. Adding FactoryEye solution to JDEMart’s marketplace provides manufacturers using JD Edwards with real-time, actionable intelligence to decision-makers at all levels.
For its fiscal first quarter, ended March 31, 2021, MGIC’s non-GAAP revenues increased 25.9% year-over-year to $107.30 million. The company’s non-GAAP gross profit came in at $31.71 million, up 18.6% from the prior-year period. Its non-GAAP operating income has been reported at $14.98 million, representing a 36.6% rise from the prior year. MGIC’s non-GAAP net income came in at $10.27 million, representing a 9.5% rise from the year-ago period. Its non-GAAP EPS increased 10.5% year-over-year to $0.21. As of March 31, 2021, the company had $97.56 million in cash and cash equivalents.
A $0.22 consensus EPS estimate in the current quarter, ending September 30, 2021, represents a 14% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect MGIC’s revenue to improve 15% year-over-year for the current quarter to $109.10 million. The stock’s EPS is expected to grow at a 11.6% rate per annum over the next five years.
The stock has gained 34.7% over the past nine months and 6% over the past three months. It ended yesterday’s trading session at $17.38.
MGIC’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
The stock has a B grade for Sentiment, Growth, Stability, Value, and Momentum. Click here to see the additional ratings for MGIC’s Quality.
MGIC is ranked #4 in the Software - Application industry.
PRGS shares were trading at $45.76 per share on Tuesday afternoon, up $0.60 (+1.33%). Year-to-date, PRGS has gained 2.06%, versus a 18.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.3 Small-Cap Software Stocks to Buy in August appeared first on StockNews.com