The software industry has remained under pressure so far this year amid an ongoing tech sell-off. The Fed’s hawkish tilt, coupled with surging market volatility, have caused the benchmark Nasdaq Composite index to slump 12.5% year-to-date and 11.6% over the past three months.
Nonetheless, overwhelming demand with respect to the software industry continues unabated, thanks to rapid digitization and remote lifestyles. So cheap, undervalued software stocks with strong revenue growth prospects might be ideal bets now, given the strong industry tailwinds.
Given this backdrop, we think it could be wise to bet on cheap yet quality software stocks Commvault Systems, Inc. (CVLT) and NetScout Systems, Inc. (NTCT).
Click here to check out our Software Industry Report for 2022
Commvault Systems, Inc. (CVLT)
CVLT in Oceanport, N.J. provides data protection and information management software applications and related services in the United States and internationally. Its Intelligent Data Services Platform is available as a software subscription.
On Jan. 25, 2022, Sanjay Mirchandani, President, and CEO, said, "Increasingly, customers are turning to us because we provide one platform for software and SaaS offerings to address a multitude of data management needs. This is fueling our growth and accelerating our journey to a cloud-first recurring revenue model."
CVLT’s total revenues came in at $202.38 million for its fiscal 2022 third quarter, ended Dec. 31, 2021, up 7.7% year-over-year. Its non-GAAP net income was $31.23 million, up 14.2% year-over-year, while its non-GAAP EPS came in at $0.67, up 17.5% year-over-year.
CVLT’s 3.40x forward EV/S is lower than the 3.48x industry average. Its 16.78x forward EV/EBIT is also lower than the 17.04 industry average.
For its fiscal year 2023, analysts expect CVLT’s revenue to be $817.29 million, representing a 6.7% year-over-year rise. The company’s EPS is expected to increase 15.4% year-over-year to $2.78 in 2023. It surpassed the EPS estimates in three of four trailing quarters. The stock closed Friday’s trading session at $63.25.
CVLT’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has an A grade for Value and Quality and a B grade for Growth. Click here to see CVLT’s ratings for Momentum, Stability, and Sentiment as well. Again, CVLT is ranked #3 of 165 stocks in the Software - Application industry.
NetScout Systems, Inc. (NTCT)
NTCT provides service assurance and cybersecurity solutions to protect digital business services against disruptions in the United States, Europe, the Asia Pacific, and internationally. Its unique products are nGeniusONE; nGeniusPULSE; nGenius Business Analytics solution. NTCT is headquartered in Westford, Mass.
On Jan. 27, 2022, Anil Singhal, NTCT’s president, and CEO, said, “Increased enterprise customer demand and the substantial acceleration of service provider customer orders, previously forecasted to occur in our fourth quarter, led to higher sales, margins, and profitability.”
NTCT’s total revenue came in at $262.19 million for its fiscal year 2022 third quarter, ended Dec. 31, 2021, up 14.6% year-over-year. Furthermore, its non-GAAP net income came in at $66.5 million, up 36% year-over-year, while its non-GAAP EPS came in at $0.89, up 34.8% year-over-year.
NTCT’s 2.52x forward EV/S is 27.7% lower than the 3.48x industry average Its 2.67x forward P/S is also lower than the 3.54x industry average.
Analysts expect NTCT’s revenue to increase 3.8% year-over-year to $887.82 million in its fiscal 2023. Its EPS is expected to increase 11.3% year-over-year to $1.97 in fiscal 2023. The stock surpassed EPS estimates in three of four trailing quarters. And over the past year, the stock has gained 9.9% in price to close Friday’s trading session at $31.36.
NTCT has an overall A rating, which equates to a Strong Buy in our POWR Ratings system.
It has an A grade for Value and a B grade for Growth and Quality. It is ranked #2 of 81 stocks in the Technology - Services industry. Click here to see the additional ratings for NTCT (Momentum, Stability, and Sentiment).
Click here to check out our Software Industry Report for 2022
CVLT shares were trading at $63.84 per share on Monday afternoon, up $0.59 (+0.93%). Year-to-date, CVLT has declined -7.37%, versus a -7.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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