Over the years, the software industry has changed the way organizations conduct their businesses and people connect with each other on the back of technological progress and innovations.
When we think of the software industry, the first name that comes to our mind is Microsoft Corporation MSFT. Its operatingsystems are installed on the majority of computers globally. It is also one of the leading providers of cloud infrastructure and services.
With its sustained focus on innovation, the world’s largest software company has reached market capitalization of over $423 billion. Moreover, Microsoft has an enviable history of surpassing the Zacks Consensus Estimate.
Microsoft beat the Zacks Consensus Estimate in the trailing six quarters with an average surprise of 13.5%. In the last reported quarter, the company’s top line and bottom line surpassed the respective estimates.
For the third-quarter fiscal 2016 too, we expect Microsoft to beat our expectations as it currently carries a Zacks Rank #3 (Hold) and Earnings ESP of 1.59%. Further, the company is now focusing on pushing its cloud infrastructure software, which should be a positive.
Microsoft’s shift to the cloud is paying off as its commercial cloud revenue runrate touched $9.4 billion in second-quarter fiscal 2016. Therefore, the company’s target of touching $20 billion in annualized commercial cloud revenue runrate by 2018 looks achievable.
Microsoft has huge growth potential; however, there are other players in the software industry which may outperform it.
3 Stocks to Consider in the Software Industry
With the help of our style score system, we have identified three software stocks with excellent growth potential and a favorable Zacks Rank that can significantly boost your portfolio.
Our Growth Style Score condenses all the essential metrics from the company’s financial statements to achieve a true sense of quality and sustainability of its growth. Our research shows that stocks with Growth Style Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best investment opportunities in the growth investing space.
Apart from this, all the stocks listed below have delivered a positive average EPS over the last four quarters.
Citrix Systems Inc. CTXS
Citrix Systems is one of the leading suppliers of application delivery and management software and services that facilitate effective and efficient enterprise-wide deployment and management of applications.
With a Growth Style Score of B and a Zacks Rank #2, Citrix has posted positive earnings surprises in the four trailing quarters, with an average beat of 30.66%. Moreover, the stock has a long-term earnings per share (EPS) growth rate of 14.4%.
Intuit Inc. INTU
Intuit provides software which helps people to manage their financials.
This company has posted positive earnings surprises in the four trailing quarters, with a massive average surprise of 73.02%. The Zacks Rank #2 stock also has a Growth Style Score of B. Apart from this, Intuit has a long-term EPS growth rate of 19%.
Interact Intelligence Inc. ININ
Interact Intelligence is a provider of software that manages a broad range of customer interactions including traditional telephone calls and faxes as well as Internet-based interactions such as emails, text chats, Web callback requests and voice over Net calls.
Not only does this stock carry a Zacks Rank #2, it also has an attractive growth Style Score of A. Also, the company has a trailing four-quarter positive average earnings surprise of a whopping 55.74%. Additionally, the stock has a long-term EPS growth rate of 15%.
Conclusion
For those keen on investing in the software industry, it might be prudent to take a look at the stocks mentioned above.
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