The pandemic-induced digital transformation drive across industries is increasing the demand for advanced software solutions. And increasing investments in cloud-based solutions bode well for the software industry. Software spending is expected to climb 9.8% to $674.90 billion in 2022, while enterprise software is expected to grow at its highest ever rate this year..
Furthermore, the digital transformation trend is expected to be a long-term phenomenon that will continue to boost the industry’s growth. With emerging technologies and new breakthroughs, the software development landscape is constantly evolving.
Against this backdrop, we think small-cap software stocks Progress Software Corporation (PRGS), Rimini Street, Inc. (RMNI), and Commvault Systems, Inc. (CVLT), which currently look undervalued at their current price levels, could be ideal additions to one’s watchlist now.
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Progress Software Corporation (PRGS)
PRGS in Bedford, Mass., provides software products to develop, deploy, and manage business applications. Its product categories include Devops, Infrastructure Monitoring, UI/UX Tools, Secure File Transfer, Secure Data Connectivity and Integration, Mission-Critical App Platform, and Intelligent Decisioning. PRGS has a $2.01 billion market capitalization. of.
Last month , PRGS announced the availability of 35-plus new Progress DataDirect connectors to enhance data connectivity in disparate applications. This is expected to add to the company’s portfolio of pre-built connectors and help it leverage technology and provide direct real-time connectivity to various popular data sources.
In the same month, the company released the Progress WhatsUp Gold, an IT-infrastructure monitoring and security software that effectively manages complex, multi-vendor, hybrid environments spanning beyond the network edge. The company also introduced the integration of the new software with its monitoring and diagnostics capability Progress Flowmon. This unified approach to network infrastructure and security visibility is expected to reduce complexity and increase efficiency in organizations. This could prove to be strategically beneficial for the company.
In terms of its forward EV/Sales, PRGS is currently trading at 4.01x, which is 28.5% lower than the 3.12x industry average. Its 10.2 forward EV/EBIT multiple is 35.8% lower than the 15.76 industry average.
PRGS’ revenue has increased 11.9% from the prior-year quarter to $147.50 million in its fiscal first quarter, ended Feb. 28, 2022. Its non-GAAP income from operations came in at $58.73 million, reflecting a 3.7% increase year-over-year, while its non-GAAP net income stood at $43.56 million, up 2.5% year-over-year. Its non-GAAP EPS increased 2.1% from the previous year’s quarter to $0.97.
The $0.95 consensus EPS estimate for its fiscal second quarter, ending May 31, 2022, represents a 15.9% year-over-year improvement. The $146.45 million consensus revenue estimate for the same quarter represents a 13.4% increase from the same period last year. PRGS also has an impressive earnings surprise history; it has topped Street EPS estimates in each of the trailing four quarters.
PRGS stock has gained 1.6% in price over the past year and 4.8% over the past month to close the last trading session at $45.94.
PRGS’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, translating to Strong Buy in our POWR ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
PRGS also has an A grade in Quality and a B in Growth and Value. It is ranked #3 of 159 stocks in the Software – Application industry.
Beyond what is stated above, we have also rated PRGS for Momentum, Stability, and Sentiment. Get all the PRGS ratings here.
Rimini Street, Inc. (RMNI)
With a market cap of $550.27 million, Las Vegas-based RMNI is a global provider of enterprise software products and services, which include software support services for SAP, Oracle, Microsoft, IBM, Open Source, Salesforce, and Others.
On April 12, RMNI announced that Sajo Systems, a division of Korean Sajo Group, has partnered with the company to provide a high level of support and software maintenance services for its SAP S/4HANA system. Also this month, the company announced that France-based Labeyrie Fine Foods partnered with RMNI to enable its digital evolution by redeploying resources to accelerate the migration of its business-critical applications to the cloud. This reflects the expansion in RMNI’s global portfolio, enabling clients like Sajo Systems and Labeyrie Fine Foods to optimize and transform their technology landscape.
RMNI’s 1.26 forward EV/Sales multiple is 59.6% lower than the 3.12 industry average. In terms of its forward Price/Sales, the stock is trading at 1.35x, which is 58.9% lower than the 3.28x industry average.
RMNI’s revenues increased 13% year-over-year to $99.28 million in its fiscal fourth quarter, ended Dec.31, 2021. Its operating income grew 185.2% from its year-ago value to $12.75 million. The company’s net income increased 2,694.5% year-over-year to $70.06 million. Also, its net income per share attributable to common stockholders came in at $0.77, up 1,383.3% from the prior-year quarter.
Analysts expect RMNI’s revenue for its fiscal quarter ended March 31, 2022, to come in at $95.67 million, indicating an increase of 8.9% year-over-year. The company’s EPS is expected to grow 2.1% year-over-year to $0.11 in the same quarter. RMNI has also beaten the consensus EPS estimates in the trailing four quarters.
RMNI’s shares have gained 22.1% in price over the past three months to close the last trading session at $6.30. The stock has gained 18.9% over the past month.
It is no surprise that RMNI has an overall rating of A, which equates to Strong Buy in our POWR Ratings system.
RMNI also has an A grade in Quality and a B in Growth, Value, and Sentiment. It is ranked #2 in the Software – Application industry.
In addition to the POWR Rating grades I have just highlighted, you can see the RMNI’s ratings for Momentum and Stability here.
Commvault Systems, Inc. (CVLT)
CVLT in Oceanport, N.J. develops, markets, and sells a suite of software applications and products that provide data protection and information management software applications. The company’s offerings are organized into Data Protection, Data Insights, and Storage. It sells its offerings to large enterprises, small- and medium-sized businesses, and government agencies. CVLT has a $2.91 billion market cap.
On February 16, CVLT announced that it would roll out its Metallic Data Management as a Service (DMaaS) solutions in Qatar. Nader Kassir, Country Manager, Qatar at CVLT, said, “Following an incredible reception of Metallic in the region earlier this year, we look forward to providing our customers in Qatar with enterprise-grade, industry-leading data protection solutions.” Earlier in February, CVLT launched the DMaaS solution in Japan.
In January, Veristor Systems, Inc, a provider of transformative business technology solutions, joined CVLT’s Commvault Partner Advantage Program as a Metallic Managed Service Provider to offer a data management solution and help companies keep their data protected from data loss. CVLT is expected to benefit from leveraging Veristor’s expertise in deploying and managing resilient data management solutions.
In terms of its trailing 12-month EV/Sales, CVLT is currently trading at 3.52x, which is 1.6% lower than the 3.57x industry average. Its trailing 12-month Price/Cash Flow multiple of 18.80 is 8.2% lower than the 20.47 industry average.
CVLT’s total revenue increased 7.7% year-over-year to $202.38 million in its fiscal third quarter, ended Dec. 31, 2021. Its income from operations grew 363.3% from its year-ago value to $12.36 million, while its net income improved 498.2% year-over-year to $10.00 million. Its EPS has increased 600% from its year-ago value to $0.21.
The $0.64 consensus EPS estimate for its fiscal quarter, ended March 31, 2022, represents a 7.6% improvement year-over-year. The $202.02 million consensus revenue estimate for the fourth quarter reflects a 5.6% increase from the same period last year. The company has an impressive earnings surprise history; it has surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 8.1% in price over the past month to close the last trading session at $65.29.
CVLT’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
CVLT has an A grade in Quality and a B in Growth and Value. The stock is ranked #1 in the Software – Application industry.
In addition to the POWR Ratings grades I have just highlighted, one can see the CVLT ratings for Momentum, Stability, and Sentiment here.
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PRGS shares were trading at $47.44 per share on Thursday afternoon, up $1.50 (+3.27%). Year-to-date, PRGS has declined -1.33%, versus a -6.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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