Software is eating the world, and virtually no business is left untouched by it. In the past, the undeniable tailwinds fueling SaaS companies led to lofty valuation multiples that made it easier to raise capital. But this was a double-edged sword as the high prices exposed them to big drawdowns, and unfortunately, the industry has tumbled by 2.6% over the last six months. This drawdown is a stark contrast from the S&P 500’s 14.3% gain.
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 are two software stocks we think can generate sustainable market-beating returns and one that may face trouble.
One Software Stock to Sell:
SoundHound AI (SOUN)
Market Cap: $4.71 billion
Born from the idea that machines should understand human speech as naturally as people do, SoundHound AI (NASDAQ:SOUN) develops voice recognition and conversational intelligence technology that enables businesses to integrate voice assistants into their products and services.
Why Does SOUN Give Us Pause?
- Gross margin of 39.7% is way below its competitors, leaving less money to invest in areas like marketing and R&D
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Cash-burning history makes us doubt the long-term viability of its business model
SoundHound AI is trading at $11.27 per share, or 21.4x forward price-to-sales. To fully understand why you should be careful with SOUN, check out our full research report (it’s free for active Edge members).
Two Software Stocks to Buy:
Shopify (SHOP)
Market Cap: $204.2 billion
Starting with just three people selling snowboards online in 2004, Shopify (NYSE:SHOP) provides a comprehensive platform that enables merchants of all sizes to create, manage and grow their businesses across multiple sales channels.
Why Is SHOP a Good Business?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 30.8% over the last year
- Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
Shopify’s stock price of $158 implies a valuation ratio of 15.4x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
Doximity (DOCS)
Market Cap: $9.52 billion
With over 80% of U.S. physicians as members of its digital community, Doximity (NYSE:DOCS) operates a digital platform that enables physicians and other healthcare professionals to collaborate, stay current with medical news, manage their careers, and conduct virtual patient visits.
Why Should You Buy DOCS?
- Billings growth has averaged 20.1% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
- Strong free cash flow margin of 50.2% enables it to reinvest or return capital consistently
At $50 per share, Doximity trades at 15x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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