2 Software Stocks with Competitive Advantages and 1 Facing Challenges

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’s 5.3% gain has lagged the S&P 500 by 5.2 percentage points.

Investors should tread carefully as only some businesses are worthy of their valuations, and luckily for you, we started StockStory to help you find them. With that said, here are two resilient software stocks at the top of our wish list and one we’re swiping left on.

One Software Stock to Sell:

nCino (NCNO)

Market Cap: $3.72 billion

Born from the internal technology needs of a community bank in 2011, nCino (NASDAQ:NCNO) provides cloud-based software that helps financial institutions streamline client onboarding, loan origination, and account opening processes.

Why Is NCNO Not Exciting?

1. Sales trends were unexciting over the last three years as its 19.1% annual growth was below the typical software company
2. Estimated sales growth of 5.7% for the next 12 months implies demand will slow from its three-year trend
3. Gross margin of 60.2% is below its competitors, leaving less money to invest in areas like marketing and R&D

nCino is trading at $32 per share, or 6.1x forward price-to-sales. To fully understand why you should be careful with NCNO, check out our full research report (it’s free).

Two Software Stocks to Watch:

Dynatrace (DT)

Market Cap: $15.26 billion

With its platform processing over 30 trillion pieces of IT performance data daily, Dynatrace (NYSE:DT) provides an AI-powered platform that helps organizations monitor, secure, and optimize their applications and IT infrastructure across cloud environments.

Why Does DT Stand Out?

1. Average billings growth of 18.9% over the last year enhances its liquidity and shows there is steady demand for its products
2. Software is difficult to replicate at scale and leads to a premier gross margin of 81.9%
3. Strong free cash flow margin of 26.2% enables it to reinvest or return capital consistently

Dynatrace’s stock price of $50.40 implies a valuation ratio of 7.5x forward price-to-sales. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

Shopify (SHOP)

Market Cap: $183.6 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 Are We Fans of SHOP?

1. Payment activity on its platform is soaring as its TPV growth averaged 33.6% over the last year, enabling the company to collect more fees and upsell additional services like banking
2. Expected revenue growth of 23.7% for the next year suggests its market share will rise
3. Software platform has product-market fit given the rapid recovery of its customer acquisition costs

At $141.30 per share, Shopify trades at 14.9x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.

Stocks We Like Even More

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% 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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