Are you interested in the stock market but unsure where to start? Are you a savvy investor looking for the next big thing?
The SaaS industry has been booming recently, and investing in SaaS stocks is a great way to diversify your portfolio.
But with so many options, knowing which stocks are the best can be hard.
In this article, I’ll review the best SaaS stocks on the market, provide an overview of their value, and give insights into what makes them such great investment opportunities.
Fun fact: We use a few of these SaaS products ourselves too!
11 Best Software As A Service (SaaS) Stocks
- Microsoft Corporate
- Adobe Systems Incorporated
- Alphabet Inc Class A
- Zoom Video Communications
- Splunk Inc
- Smartsheet Inc
- Coupa Software Incorporated
|Market Capitalisation USD||Dividend Yield|
|1||Microsoft Corporation||MSFT||245.42||1.83 Trillion||1.01%|
|3||Adobe Systems Incorporated||ADBE||338.54||157.39 Billion||–|
|5||Alphabet Inc Class A||GOOGL||90.26||1.17 Trillion||–|
|6||Zoom Video Communications||ZM||69.86||20.42 Billion||–|
|7||Splunk Inc.||SPLK||87.40||14.31 Billion||–|
|8||Smartsheet Inc||SMAR||42||5.52 Billion||–|
|9||Coupa Software Incorporated||COUP||78.72||5.99 Billion||–|
- The S&P500 is a capitalisation-weighted measurement index for the stock market index that tracks the stock performance of 500 big companies listed on US stock exchanges.
- Chart sources from Yahoo Finance
- Accurate as of 31 December 2022
Microsoft Corporation (MSFT)
Microsoft Corporation is a tech company that develops and supports software, solutions, services, and devices.
Some of Microsoft’s segments include More Personal Computing, Intelligent Cloud, Productivity, and Business Processes.
The current share price of Microsoft is $245.42, and it falls under the High Flyer classification.
|S&P500 Benchmark||Microsoft Corporation (MSFT)||Difference|
Over the last 5 years, MSFT has outperformed the S&P500 Benchmark by 212.691%%, making the stock a High Flyer.
However, in the last year, it has moved by -21.0% and underperformed the benchmark by 38.862%. The overall consensus of the stock is a HOLD.
Despite a drop in the stock price, the company’s focus on broadening its operations is extremely promising.
The company’s dividend yield is 1.01% based on the trailing 12-month period. The company paid a total dividend of $2.48 per share in the previous year.
Moving forward, the shares will go ex-dividend on 15 February 2023. The next pay date is March 09, 2023.
The P/E ratio, based on the reported earnings over the last year, is 23.88.
The company’s growth prospects are quite promising given that it’s currently promoting metaverse, an immersive and next-gen version of the internet.
In early 2022, the company announced plans to purchase Activision Blizzard (ATVI), a video game publishing company, hoping to accelerate the gaming business.
Microsoft upgraded the personal computer operating system to Windows 11, which features a top-notch design and improved performance.
Salesforce, Inc. is a company that provides customer relationship management (CRM) systems for businesses.
The platform links customer data across multiple devices, systems, and applications so businesses can sell and market commerce anywhere.
The company mainly focuses on artificial intelligence, social, cloud, mobile, and analytics to connect customers and help companies transform businesses.
Looking at the chart, the CRM has had a +24.98% increase over the last 5 years. Currently, the share is trading at 127.61 to deliver a market capitalisation of 127.61 Billion.
|S&P500 Benchmark||Salesforce-com (CRM)||Difference|
The track record of momentum is a key indicator of whether a stock price will increase.
Salesforce shares often exhibit persistent price patterns, which makes them important when analysing them.
From the figures, the CRM share has underperformed the benchmark by -67.702% in the last year. Additionally, it has underperformed the S&P 500 by -5.069% over 5 years.
Salesforce doesn’t have a dividend yield and hasn’t given any information about the next dividend payment date.
Despite a company revenue rises to $7.72 billion, the cloud-based giant is bracing for a slowdown. During the August Investors Conference, the CFO blamed the slowdown on decreasing consumer buying behaviour due to macroeconomic situations.
As you probably know, inflation has persisted, and the Federal Reserve has been raising the fund rates to curb rising prices. The company’s revenue has been shrinking, but margins are expanding slowly.
Analysts project the stock to perform well in 2023-2024 because cloud-based CRM services are expanding in many sectors.
Based on its reported profits over the previous 12 months, Salesforce has a PE ratio of 23.37. The most recent share price was $130.44.
The stock is a High Flyer, and the consensus recommendation is a BUY.
Adobe Systems Incorporated (ADBE)
Adobe Inc. is a software company that offers a wide range of products and services for marketers, app developers, knowledge workers, consumers, and marketers for business.
There are 3 divisions in this company: Publishing, Digital Media, and Digital Experience.
From the chart, the stock has been performing well and has gained 93.45% over 5 years.
However, in the last year, the stock fell -39.18%, mainly due to the low performance of the market caused by the market turmoil due to inflation.
|–||S&P500 Benchmark||Adobe Systems Incorporated (ADBE)||Difference|
Adobe Inc. shares currently retail at $338.54 to deliver a market capitalisation of $157.39 billion. The price moved by -39.18% over the last 12 months, and in terms of relative price strength, it undeformed the S&P 500 by -57.042%.
However, Adobe outperformed the S&P500 by 84.045% over the past 5 years.
The company has not declared any dividends or announced the next dividend payout date. The Adobe PE ratio based on last year’s results is $22.21.
The overall consensus for the Adobe Stock share is BUY because it’s a High Flyer stock. Adobe was once renowned as the maker of Acrobat and Photoshop.
But, recently, the company has begun embracing AI-generated art on its photography websites.
During the 2022 Q4 results announcement, the shares climbed more than 7% after the company announced that it would complete its purchase of Figma Inc – making it an almost monopoly in digital prototypes.
Shopify Inc. (SHOP)
Shopify is a cloud-based commerce platform that enables small and medium-sized enterprises to sell their products and services via various sales channels, including web and mobile storefronts, physical retail locations, social media, and marketplaces.
Its software enables merchants to manage their items, inventory, orders, payments, shipping, customer interactions, and analytics from a centralised, integrated back office.
Shopify also provides mobile-optimised checkout systems, allowing customers to purchase things effortlessly via mobile websites.
To address the demands of various businesses, the organisation provides subscription and merchant solutions.
As you can see, the stock has been climbing steadily in the last 5 years. But, stockholders of Shopify have seen a terrible decline in 2022, with more than 70% of the value of the shares gone.
Those who purchased the stock at its peak could have to wait many years to recover their investment.
Nonetheless, even if a return to the high of the stock is unlikely, respectable returns are still achievable.
|S&P500 Benchmark||Shopify Inc. (SHOP)||Difference|
The current share price of Shopify Inc. stock is $36.09 delivering a market capitalisation of $45.44 billion. The share moved by -72.73% over the last year and underperformed the S&P 500 by -90.592%.
Nonetheless, it has outperformed the S&P 500 by an impressive 237.941% over the last 5 years.
The stock falls under the Neutral classification, and the overall consensus for Shopify Inc. stock is Hold. The company has not declared any dividends or announced the next dividend payout date.
Additionally, Shopify’s current price-to-earnings ratio (TTM) is -27.2995, based on the company’s most recent financial results and stock price.
It’s important to keep in mind that a negative P/E ratio shows that a business has negative earnings. Still, even the most established businesses face downtime, which may be caused by economic factors outside the company’s control.
Alphabet Inc Class A (GOOGL)
Alphabet Inc. is a search giant company that controls 3 branches: Google Services, Cloud Computing, and their innovative Other Bets division.
Underneath these divisions lies products like Ads, Android & Chrome apps, life-saving health technologies, and internet service.
Alphabet plans to cut expenditures in line with the most recent earnings reports. Advertising revenue should recover as the economy picks up.
Alphabet’s stock appears to be undervalued because it sells at a discount to the S&P500.
|S&P500 Benchmark||Alphabet Inc (GOOGL)||Difference|
Like most stocks in the tech sector, Alphabet has underperformed the S&P500 by -54.182% in the last year. However, the 5-year returns look promising at +59.491%.
The stock is a Falling Star, and the overall consensus recommendation is BUY. The company has not declared any dividends or announced the next dividend payout date.
Alphabet’s PE ratio is 17.44 based on its profits over the last 12 months.
As the year ends, the search engine giant’s shares are down, and profits have declined. There are also fears of an economic recession due to inflation.
Despite the above challenges, the company seems prepared for better days ahead in 2023. For instance, the advertising business is a reputable income-generating project for the company, and the company is an industry leader in this area.
Zoom Video Communications (ZM)
Zoom Video Communications, Inc. is a video communication platform provider. The platform connects individuals via video, webinars, phone, and chats.
It also allows interactions across various devices and teams in different locations.
Some of the main units of Zoom include; Meetings, Phone, Chat, Room, Hardware-as-a-Service, Conference Room Connector, Events, Webinars, Developer Platforms, App Marketplace, and Contact.
As you can see, the share price has been falling since 2020 during the emergence of the COVID-19 pandemic. If you remember, in 2020, many people were working at home due to containment measures put in by Governments.
|S&P500 Benchmark||Zoom (ZM)||Difference|
Currently, the share is trading at $69.86 to deliver a market capitalisation of $20.42 billion. Zoom Video Communications stock is now rated as Neutral and a Hold on an overall basis.
The company has not declared any dividends nor announced the next dividend payout date.
The P/E ratio based on current earnings is 30.93.
The share has underperformed the S&P 500 by -82.882% over one year. The track record of momentum is a significant determinant of whether a stock price will rise.
Price patterns may persist for stocks like ZM, so it’s important to keep an eye on them.
There was a positive outlook for companies like Zoom during the pandemic, and the future looked certain. But, the pandemic boom has faded, and the share price has been downward.
There’s also a lot of competition from Teams, Webex, Slack, and Google Meets, which offer such services. Nonetheless, Analysts predict that if the company can grow instead of spending too much on protecting its market share, it can turn things around.
Splunk Inc. (SPLK)
Splunk Inc. is a company that offers solutions that help organisations optimise their systems and keep them secure by using data from digital systems.
Their offerings are divided into three categories: Splunk Platform, Splunk Solutions, and Customer and Partner Solutions.
These offerings can be delivered as a combination of cloud services and on-premise licensed software that customers and partners can use in their environments.
The Splunk platform is a real-time data platform that includes capabilities for data collection, streaming, indexing, search, reporting, analysis, machine learning, alerting, monitoring, and data management.
The chart shows the price has fluctuated in the last 5 years. However, this year there has been a decline due to a market crash caused by the economic crisis.
|S&P500 Benchmark||Splunk Inc. (SPLK)||Difference|
Shares in Splunk last closed at $87.40 to deliver a market capitalisation of 14.31 Billion.
Further, the price has moved by -20.26% over the last year, and in terms of relative price strength, it has outperformed the S&P 500 by -38.122 % over the last 5 years. It has also underperformed the benchmark by -3.789%.
Based on the overall assessment, the share is a High Flyer, and the consensus recommendation is a BUY.
The company did not pay any dividends in the current year and has not announced the next dividend payout date.
Analysts forecast an increase in the stock price because the prices of such stocks tend to persist. The P/E ratio of Splunk based on reported results over the last year is 36.28.
Investors who are patient and hold onto the stock will gain from buying it at the present price.
Even though the company’s earnings have fallen this year, there’s a positive outlook and long-term growth potential.
That is why I’ve ranked SPLK among the SaaS stocks to buy and keep for future returns.
Smartsheet Inc (SMAR)
Smartsheet Inc. is a platform that allows businesses to organise work and processes at scale. The dynamic company provides cloud-based software products to its clients through a subscription model.
In addition, Smartsheet Inc provides Resource Management, a resource planning tool that assists businesses in locating and scheduling projects and tracking and managing time. It also helps firms to forecast recruiting or staffing needs.
The company also offers Brandfolder, a digital asset management tool enabling employees to manage creative files.
Other applications that the company provides include calendars, work apps, and dashboards.
The stock has had a modest rise in the last 5 years except in 2022, where there was a decline.
|S&P500 Benchmark||Smartsheet Inc (SMAR)||Difference|
Smartsheet shares are currently trading at $42 to deliver a market capitalisation of $5.52 billion.
The stock price has decreased by 41.98% over the last 12 months.
In terms of relative price strength, the share price has underperformed the S&P 500 benchmark by -59.842% over the year. But, it has outperformed the reference by 105.971% in five years.
The company did not pay any dividends this year and has not announced the next dividend payout date.
Based on an overall assessment, the share classification is a High Flyer, and the consensus recommendation is BUY.
Based on the one-year earnings, the P/E ratio is null. Usually, a NULL P/E ratio may mean that the company has negative earnings per share.
But Smart Sheet issued its initial public offering(IPO) in 2018; it’s a relatively new stock on the market.
Like other tech firms, Smartsheet stock declined in 2022 and lost significant value. Due to the overall market selloff caused by fears of a recession, the shares have fallen in the last year.
Lately, there has been a lot of attention on the share, probably due to the demand for collaboration applications and remote work trends.
Coupa Software Incorporated (COUP)
Coupa Software Inc. provides business spend management (BSM) solutions.
The company offers a cloud-based BSM platform that connects its clients to suppliers worldwide.
It gives insights and control over how businesses spend money, streamlines supply networks, and controls liquidity.
The Company’s BSM platform provides a variety of functionalities that would normally necessitate the acquisition and deployment of numerous distinct point apps.
The foundation of its platform comprises purchasing, bill, budget control, and billing modules, which create the transactional power unit for controlling a company’s business expenditure.
The stock has been rising steadily for the last 5 years, and although the price took a dip in 2022, there are signs that it will start rising again.
|S&P500 Benchmark||Coupa Software Incorporated (COUP)||Difference|
The current share price of Coupa Software stock is $78.72 to deliver a market capitalisation of 5.99 Billion.
The Share price has moved by -48.63% over the last year. In terms of relative price strength, the Coupa Software share price has underperformed the S&P500 Index by -66.492% over the past year.
On the same note, it has outperformed the S&P500 by an impressive 137.591% in a five-year period.
The share is a High Flyer, and the consensus recommendation is Hold.
The company did not pay any dividends this year and has not provided any information about the next dividend payout date.
The P/E ratio of the stock based on trailing 12-month earnings is 100.78.
As a software provider, the company’s products are attractive to the economy, which explains why Thomas Bravo proposed to buy the business for $8 billion.
Word has it that several other companies were interested in buying the company.
Dropbox, Inc. is a collaboration platform that allows users to create, access, organise, share, collaborate, and safeguard material. It develops functionalities such as Dropbox paper and doc scanner.
In recent months, tech stocks have underperformed. Many equities are down from their prior highs, making it difficult for investors to bear.
However, with falling, stock prices come tremendous purchasing opportunities for long-term investors.
Dropbox is no exception; its shares have been down more than 25% in the last 12 months.
|S&P500 Benchmark||Dropbox (DBX)||Difference|
Currently, the stock is trading at $23.20 to deliver a market capitalisation of $8.42 billion. The price had moved by -2.85% over the 12 months.
In terms of relative price strength, the stock has underperformed the S&P500 by -20.712% over the last year. In addition, it has underperformed the benchmark by -27.949% during a five-year period.
No dividends were paid this year, and there’s no information about the next dividend payout date. The P/E ratio based on last year’s profits is 13.35.
From a profitability standpoint, investors should expect an increase in revenues thanks to the DocSend and HelloSign acquisitions.
Also, Dropbox has been adding new products which may add value to its subscribers.
In my view, Dropbox Inc. (DBX) would be a solid choice for value investors because it’s a Super Stock.
DBX’s financial health and development prospects show that it can outperform the market. Dropbox has a bright future ahead of it, and the stock is priced at an appealing valuation with minimal risk and a great return.
DocuSign, Inc. provides an electronic signature tool that allows a document to be signed digitally from practically anywhere globally on various devices.
DocuSign Agreement Cloud is a cloud software system that streamlines and integrates the whole agreement process and is available from the company.
It also provides DocuSign eSignature, which is an electronic signing service.
As you can see from the chart, the share has been climbing steadily in the last 5 years, except in 2022, when it fell.
As noted earlier, this has been the trend in the stock market due to high inflation and recession fears.
|S&P500 Benchmark||DocuSign (DOCU)||Difference|
The DocuSign stock has underperformed the benchmark by -79.862% over a 12-month period and outperformed it by +32.221% over 5 years.
Currently, the share is trading at $56.27 to deliver a market capitalisation of $11.31 billion. It falls under the High Flyer classification, and the overall consensus recommendation is Hold.
The company did not pay any dividends this year, and there’s no information on the next payment date. The DocuSign P/E ratio based on the one-year earnings is 26.5.
DocuSign stock has surged upwards of 33% after the release of Quarter 3 earnings, yet the business has lost up to 64% of its market value in the last 12 months.
Investors must evaluate the demand environment to get a clear perspective of the stock moving forward.
Whereas DocuSign’s nature of business is disruptive in how people execute documents digitally, there’s a margin of safety for investors to stake their money on the stock.
In conclusion, there are a lot of great SaaS stocks out there.
Some have short-term gains potential, while others have the potential for longer-term growth.
The key is to do your homework and pick the ones that are right for you and your needs.
If you want to maximize your returns, don’t forget to consider diversifying your investments in other industries as well.
That way, you can benefit from both short-term and long-term gains in all types of stocks, ensuring that when the market takes a turn, you can weather the storm with minimal losses.
Invest wisely, and don’t be afraid to take some risks!
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