Software is rapidly reducing operating expenses for businesses. This secular theme makes SaaS companies attractive investment candidates but also comes with higher valuations that cause volatility. Unfortunately, the rich prices have haunted them over the past six months as the industry has shed 16.9%. This performance is a far cry from the S&P 500’s 9.9% ascent.
However, some businesses can support their premium valuations with superior earnings growth, and our mission at StockStory is to help you find them. With that said, here is one software stock boasting a durable advantage and two best left ignored.
Two Software Stocks to Sell:
Qualys (QLYS)
Market Cap: $3.05 billion
Originally developed to address the growing complexity of IT security in the cloud era, Qualys (NASDAQ: QLYS) provides a cloud-based platform that helps organizations identify, manage, and protect their IT assets from cyber threats across on-premises, cloud, and mobile environments.
Why Is QLYS Not Exciting?
- Average billings growth of 9.1% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
- Estimated sales growth of 7.7% for the next 12 months implies demand will slow from its two-year trend
- Operating margin expanded by 2.5 percentage points over the last year as it scaled and became more efficient
Qualys’s stock price of $88.32 implies a valuation ratio of 4.4x forward price-to-sales. Read our free research report to see why you should think twice about including QLYS in your portfolio.
Asure Software (ASUR)
Market Cap: $243.2 million
Operating in the often-overlooked smaller metropolitan markets where HR expertise can be scarce, Asure Software (NASDAQ: ASUR) provides cloud-based human capital management software and services that help small and medium-sized businesses manage payroll, taxes, time tracking, and HR compliance.
Why Does ASUR Worry Us?
- Annual revenue growth of 12.3% over the last two years was below our standards for the software sector
- Estimated sales growth of 10.4% for the next 12 months implies demand will slow from its two-year trend
- Low free cash flow margin of 5.3% for the last year gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $8.50 per share, Asure Software trades at 1.5x forward price-to-sales. If you’re considering ASUR for your portfolio, see our FREE research report to learn more.
One Software Stock to Buy:
Guidewire Software (GWRE)
Market Cap: $10.63 billion
With its systems powering the operations of hundreds of insurance brands across 42 countries, Guidewire Software (NYSE: GWRE) provides a technology platform that helps property and casualty insurance companies manage their core operations, digital engagement, and analytics.
Why Are We Backing GWRE?
- Billings have averaged 21.1% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
- Solid free cash flow generation relative to most peers gives it a cushion and grants it various reinvestment opportunities
Guidewire Software is trading at $125.70 per share, or 7.3x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
