From commerce to culture, software is digitizing every aspect of our lives. The undeniable tailwinds driving the industry have also resulted in decent returns for SaaS stocks of late, as they gained 9.2% over the past six months. This performance was almost identical to that of the S&P 500.
Still, investors should be cautious as AI will commercialize many software products and betting on the wrong horse could result in big losses. With that in mind, here are two resilient software stocks at the top of our wish list and one we’re steering clear of.
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A software stock for sale:
Five9 (FIVN)
Market capitalization: $1.90 billion
Named after the “Five Nines” (99.999%) standard for optimal service reliability in telecommunications, Five9 (NASDAQ:FIVN) provides cloud-based software that enables companies to operate their contact centers with customer service, sales and marketing tools across multiple communication channels.
Why should you discard FIVN?
- Average revenue growth of 9.4% last year was below average, suggesting the company was struggling to push its software and may have had to cut prices to stimulate demand
- Estimated sales growth of 10.1% for the next 12 months suggests demand will moderate from its two-year trend
- The gross margin of 55.5% reflects the high maintenance costs
Five9 trades at $25.30 per share, which is 1.7 times forward price-to-sales ratio. Dive into our free research report to find out why there are better options than FIVN.
Two software stocks to keep an eye on:
Freshworks (FRSH)
Market capitalization: $2.93 billion
Freshworks (NASDAQ:FRSH) started as a customer service solution and then evolved into a comprehensive software suite. It offers AI-powered software-as-a-service solutions that help companies manage customer service, IT support, sales and marketing functions.
Why do we like FRSH?
- Annual revenue growth of 25.8% over the past five years exceeded the industry average as the software resonated with customers
- Superior software functionality and low maintenance costs result in a best-in-class gross margin of 85%
- The robust free cash flow margin of 25.7% offers many options for capital deployment
Freshworks’ share price of $10.51 implies a valuation ratio of 3x forward price to sales. Is now the right time to buy? Find out in our full research report, it’s free.
PTC (PTC)
Market cap: $14.28 billion
PTC (NASDAQ:PTC), originally known as Parametric Technology Corporation until its name change in 2013, provides software that helps manufacturers design, develop and maintain physical products through digital solutions for CAD, PLM, ALM and SLM.
Why are we optimistic at PTC?
- The average sales growth of 21% over the last year increases the company’s liquidity and shows that there is a steady demand for its products
- Superior software functionality and low maintenance costs are reflected in the excellent gross margin of 84.7%.
- The highly efficient business model is illustrated by its impressive operating margin of 38.7% and increased its profits by achieving some leverage on fixed costs
At $123.14 per share, PTC trades at a price-to-sales ratio of 5.4 times. Is now the time to open a position? See for yourself in our detailed research report, it’s free.
Quality stocks for all market conditions
ONE MORE THING: The 6 Best Stocks This Week. This market quickly separates high-quality stocks from expensive ones. AI destroys entire sectors without warning. With such a rapid rotation, you need more than a list of good companies.
Our AI system flagged Palantir before it achieved 1,662% performance between October 2022 and February 2026. AppLovin before achieving 753% performance between February 2024 and February 2026. Get our top 6 stocks for free HERE.
Stocks on our list in 2020 include now-familiar names like Nvidia (+1,460% between June 2020 and June 2025) as well as lesser-known companies like the once-small Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
https://stockstory.org/us/stocks/nasdaq/fivn/news/buy-or-sell/2-software-stocks-with-promising-prospects-and-1-we-ignore
