Software-as-a-Service (SaaS) stock New Relic, Inc. (NEWR) recently launched the industry's only change tracking solution. Moreover, NEWR's CEO Bill Staples said, "We are attracting new customers at a rapid pace and growing with our existing customer base as they expand their observability practices and continue with their digital transformation and cloud adoption."

NEWR surpassed consensus revenue estimates by $6.82 million for the quarter that ended in December 2022. Also, it beat EPS estimates by 111.5%.

Furthermore, demand for the SaaS industry remains robust. According to Technavio, the global SaaS market is expected to grow at a CAGR of 11.4% until 2026.

NEWR has gained 33.4% over the past month to close the last trading session at $77.12. Moreover, it has gained 11.1% over the past six months and 6.5% over the past year.

Here is what could shape NEWR's performance in the near term:

Solid Financials

NEWR's revenue came in at $239.76 million for the fiscal 2023 third quarter that ended December 31, 2022, up 17.8% year-over-year. Its gross profit increased 32.4% year-over-year to $178.45 million.

Moreover, its non-GAAP net income came in at $21.81 million compared to a loss of $11.69 million in the year-ago period, while its non-GAAP EPS came in at $0.32 compared to a loss per share of $0.18.

Favorable Growth Estimates

NEWR's revenue is expected to increase 17.6% year-over-year to $924.13 million in 2023 and 15.6% year-over-year to $1.07 billion in 2024. Its EPS is expected to increase 153.2% year-over-year to $0.41 in 2023 and 231.7% year-over-year to $1.36 in 2024.

Moreover, its EPS is expected to rise 15% per annum for the next five years. Also, it surpassed EPS estimates in three of four trailing quarters.

POWR Ratings Reflect Promising Outlook

NEWR's overall rating of B equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories.

NEWR has a B grade for Growth, consistent with its solid financials in the latest reported quarter. It has a B grade for Sentiment in sync with favorable analysts’ estimates.

In the 25-stock Software – SAAS industry, NEWR is ranked #3.

Click here for the additional POWR Ratings for NEWR (Value, Momentum, Stability, and Quality).

View all the top stocks in the Software – SAAS industry here.

Bottom Line

NEWR reported solid financials in the most recent quarter. Moreover, Wall Street analysts expect the stock to hit $79.75 in the near term, indicating a potential upside of 3.4%. Also, given its favorable growth estimates, I think NEWR might be worth buying in 2023.

How Does New Relic, Inc. (NEWR) Stack up Against Its Peers?  

While NEWR has an overall POWR Rating of B, one might consider looking at its industry peers, Park City Group, Inc. (PCYG), Informatica Inc. (INFA), and The Descartes Systems Group Inc. (DSGX), which also have an overall B (Buy) rating.

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NEWR shares were trading at $76.98 per share on Tuesday morning, down $0.14 (-0.18%). Year-to-date, NEWR has gained 36.37%, versus a 7.47% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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