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BRAZIL – 09/07/2020: In this photo illustration, the Mimecast logo seen displayed on a smartphone. … [+]
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Software as a service (SaaS) stocks have performed well thanks to Covid-19, with investors betting that the increased digitization of businesses and the continued shift to distributed businesses will drive the growth of these businesses. In our theme of Mid-cap SaaS stocks, we have selected SaaS players with market capitalizations of less than $ 10 billion who have shown strong revenue growth and expanding margins over the past two years. We believe these stocks have the prospect of better returns over large cap software stocks over the long term, while being less volatile relative to small cap stocks. The theme is down about -4% since the start of the year and up about 97% since the end of 2017.
Workiva, a company that sells cloud-based solutions for business reporting and collaboration, was the top performer in our theme, growing around 10% year-to-date. The stock has also grown more than 4 times since the end of 2017, thanks to impressive revenue growth and the trend of remote working. On the other hand, Mimecast Limited, a company that provides cloud security and risk management services for corporate information and email, was the worst performer in our theme, down by about – 24% year-to-date, although it remains up over 50% since late 2017. The recent underperformance is due to a security incident reported in early January that allowed hackers to gain access to some of its customers’ Microsoft
MSFT
[2/2/2021] Mid-cap SaaS stocks
Software as a service (SaaS) stocks were among the biggest winners after the Covid-19 stock market crash in March 2020 and the industry is likely to remain in favor even after the pandemic ends, given the increasing digitalization of businesses and continuous change. to distributed companies. Our theme on Mid-cap SaaS stocks includes software players who have shown strong revenue growth and steadily expanding margins and are trading at a market cap of less than $ 10 billion. The theme is up around 5% year-to-date, compared to the S&P 500 which has remained roughly stable since the start of the year. Under this theme, PagerDuty, a company that provides an incident response platform for IT departments, has emerged as the top performer, with an increase of around 21% year-to-date. On the other hand, Mimecast, a company that sells cloud security and risk management services for email and corporate data, has underperformed, down about -22% since the start of the year.
[12/30/2020] Mid-cap SaaS stocks
Software stocks have performed well this year, driven by several factors. First, the trend of working from home and accelerating digital transitions for businesses have helped drive demand. Second, with interest rates remaining low, investors have paid a premium for growth stocks. Third, SaaS (software as a service) business models are driven by stable and recurring revenue, which resonated well with investors through the economic uncertainty of Covid-19. In our theme Mid-cap SaaS stocks, we have selected a few SaaS players with a market capitalization of less than $ 10 billion who have performed well in recent years. With strong revenue growth and steadily expanding margins, these companies could be poised to outperform in the long run. Below is a bit more information about the key companies in our theme.
Workiva provides cloud-based solutions for businesses to collect, manage, report and analyze business data in real time in areas such as finance, accounting and compliance. The stock is up 116% this year.
PagerDuty provides a SaaS incident response platform for IT departments that helps teams find and resolve infrastructure issues quickly. The stock is up 85% this year.
RealPage
RP
Mimecast develops cloud security and risk management services for email and corporate data. The stock is up about 30% this year.
New Relic
NEWR
See our theme on Mid-cap SaaS stocks for more details on the companies in the theme and their fundamental performance in recent years.
[Updated 6/19/2020] Mid-cap SaaS stocks
Software as a service (SaaS) has emerged as one of the hottest investment themes in the tech industry, driven by two megatrends. First, the Covid-19 pandemic is forcing businesses to accelerate their digital transitions, improving productivity and collaboration as people increasingly work from home. Second, SaaS businesses are largely subscription-based, with a recurring revenue stream that could make it a relatively stable bet in times of uncertainty. It is likely that the crisis will cause a structural change, to the benefit of these stocks long after the pandemic.
Most large-cap SaaS stocks have rallied significantly this year and valuations look somewhat strained. However, we did an analysis and selected a few mid-cap (market cap below $ 10 billion) SaaS players that have appreciated less than 20% this year despite strong revenue growth and expanding margins over the years. Last 2 years. Our dashboard Trefis theme: Software stocks as a mid-cap service provides an overview of the fundamentals of 5 mid-cap SaaS stocks. Part of the analysis is summarized below.
Cloudera
CLDR
Paylocity
PCTY
Altair ($ 3 billion, + 7% year-to-date) provides software and cloud solutions for product design and development, high performance computing and data analysis. While the company’s revenue has grown at an annual rate of more than 15% over the past two years, things could turn out to be difficult in 2020 due to the company’s significant exposure to business sectors. engineering and construction, which will likely be severely affected by Covid. -19 pandemic. The stock is trading at around 6.1x, slightly below some other stocks in the group given the mixed earnings outlook and the fact that margins have been slightly volatile.
New Relic ($ 4 billion, + 3% year-to-date) develops cloud-based software that helps web and application developers track the performance of their services. As the company’s operating margins have improved from around -23% in FY’18 to -7% in FY’20, the company expects its profits to decline this fiscal year due to increased investment as it moves to a new solution called New Relic. The one that unifies the various offers of the company. The stock is trading at around 8.5 times the follow-up earnings.
Mimecast ($ 4 billion, + 3% year-to-date) develops cloud security and risk management services for email and corporate data. The company’s operations are expected to be boosted by the current pandemic as the trend of working from home prompts companies to invest more in security software. The company’s historical growth has been strong, with revenues growing 25% each year for the past two years, with operating margins recently turned positive. The stock is trading at around 6.5 times the follow-up earnings.
What if you are looking for a more balanced portfolio instead? Here is a high quality portfolio to beat the market, with over 100% return since 2016, compared to 55% for the S&P 500. Comprised of companies with strong income growth, strong earnings, plenty of cash and low risk , it has outperformed the wider market year after year, consistently.
See everything Trefis price estimates and Download Trefis data here
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