From commerce to culture, software is digitizing every aspect of our lives. 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 2.3%. This drop is a far cry from the S&P 500’s 8.5% ascent.
However, some businesses can support their premium valuations with superior earnings growth, and our mission at StockStory is to help you find them. On that note, here is one software stock poised to generate sustainable market-beating returns and two we’re swiping left on.
Two Software Stocks to Sell:
nCino (NCNO)
Market Cap: $1.61 billion
Born from the internal technology needs of a community bank in 2011, nCino (NASDAQ: NCNO) provides cloud-based software that helps financial institutions streamline client onboarding, loan origination, and account opening processes.
Why Is NCNO Not Exciting?
- Offerings struggled to generate meaningful interest as its average billings growth of 9.5% over the last year did not impress
- Estimated sales growth of 7.6% for the next 12 months implies demand will slow from its two-year trend
- Gross margin of 61.6% reflects its relatively high servicing costs
nCino is trading at $16.35 per share, or 2.6x forward price-to-sales. Check out our free in-depth research report to learn more about why NCNO doesn’t pass our bar.
Tenable (TENB)
Market Cap: $2.96 billion
Starting with the widely-used Nessus vulnerability scanner first released in 1998, Tenable (NASDAQ: TENB) provides exposure management solutions that help organizations identify, assess, and prioritize cybersecurity vulnerabilities across their IT infrastructure and cloud environments.
Why Are We Wary of TENB?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 6.9% underwhelmed
- Estimated sales growth of 6.8% for the next 12 months implies demand will slow from its two-year trend
- Operating margin expanded by 3.4 percentage points over the last year as it scaled and became more efficient
At $36.64 per share, Tenable trades at 3.6x forward price-to-sales. If you’re considering TENB for your portfolio, see our FREE research report to learn more.
One Software Stock to Buy:
Samsara (IOT)
Market Cap: $18.8 billion
From sensors on vehicles to AI-powered cameras that help prevent accidents, Samsara (NYSE: IOT) is a cloud-based Internet of Things platform that helps businesses improve the safety, efficiency, and sustainability of their physical operations.
Why Is IOT a Good Business?
- Customers view its software as mission-critical to their operations as its ARR has averaged 29.6% growth over the last year
- Forecasted revenue growth of 21.4% for the next 12 months indicates its momentum over the last two years is sustainable
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
Samsara’s stock price of $31.00 implies a valuation ratio of 9x forward price-to-sales. Is now the right time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
