From commerce to culture, software is digitizing every aspect of our lives. The undeniable tailwinds fueling SaaS companies have led to lofty valuation multiples historically, but rich prices also make re-ratings harder and place a ceiling on returns - over the past six months, the industry was flat while the S&P 500 climbed by 6.2%.
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 boasting a durable advantage and two we’re passing on.
Two Software Stocks to Sell:
BILL (BILL)
Market Cap: $4.33 billion
Transforming the messy back-office financial operations that plague small business owners, BILL (NYSE: BILL) provides a cloud-based platform that automates accounts payable, accounts receivable, and expense management for small and midsize businesses.
Why Does BILL Worry Us?
- Products, pricing, or go-to-market strategy may need some adjustments as its 12.4% average billings growth over the last year was weak
- Projected sales growth of 12.2% for the next 12 months suggests sluggish demand
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
BILL’s stock price of $43.45 implies a valuation ratio of 2.7x forward price-to-sales. If you’re considering BILL for your portfolio, see our FREE research report to learn more.
Alarm.com (ALRM)
Market Cap: $2.56 billion
Processing over 325 billion data points annually from more than 150 million connected devices, Alarm.com (NASDAQ: ALRM) provides cloud-based platforms that enable residential and commercial property owners to remotely monitor and control their security, video, energy, and other connected devices.
Why Do We Avoid ALRM?
- Average billings growth of 8.4% 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 3.5% for the next 12 months implies demand will slow from its two-year trend
- Static operating margin over the last year shows it couldn’t become more efficient
Alarm.com is trading at $51.78 per share, or 2.7x forward price-to-sales. Read our free research report to see why you should think twice about including ALRM in your portfolio.
One Software Stock to Watch:
Braze (BRZE)
Market Cap: $2.45 billion
With its technology powering interactions with 6.2 billion monthly active users across the digital landscape, Braze (NASDAQ: BRZE) provides a platform that helps brands build and maintain direct relationships with their customers through personalized, cross-channel messaging and engagement.
Why Are We Fans of BRZE?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 32.1% over the last year
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
At $21.22 per share, Braze trades at 2.6x forward price-to-sales. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
