Agilysys currently trades at $106.94 and has been a dream stock for shareholders. It’s returned 324% since August 2020, blowing past the S&P 500’s 85.3% gain. The company has also beaten the index over the past six months as its stock price is up 36.1%.
Is there a buying opportunity in Agilysys, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Agilysys Not Exciting?
Despite the momentum, we don't have much confidence in Agilysys. Here are two reasons why there are better opportunities than AGYS and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, Agilysys grew its sales at a 19% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell slightly short of our standards for the software sector, which enjoys a number of secular tailwinds.
2. Low Gross Margin Reveals Weak Structural Profitability
For software companies like Agilysys, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.
Agilysys’s gross margin is substantially worse than most software businesses, signaling it has relatively high infrastructure costs compared to asset-lite businesses like ServiceNow. As you can see below, it averaged a 62.1% gross margin over the last year. Said differently, Agilysys had to pay a chunky $37.87 to its service providers for every $100 in revenue. 
Final Judgment
Agilysys isn’t a terrible business, but it doesn’t pass our bar. With its shares outperforming the market lately, the stock trades at 9.4× forward price-to-sales (or $106.94 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. We’d recommend looking at one of Charlie Munger’s all-time favorite businesses.
High-Quality Stocks for All Market Conditions
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
