From commerce to culture, software is digitizing every aspect of our lives. Companies bringing it to life have been rewarded with high valuation multiples that make fundraising easier, but they have weighed on the returns lately as the industry has pulled back by 15.8% over the past six months. This drop is a far cry from the S&P 500’s 7.9% ascent.
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. On that note, here is one resilient software stock at the top of our wish list and two we’re passing on.
Two Software Stocks to Sell:
Marqeta (MQ)
Market Cap: $1.72 billion
Powering the cards behind innovative fintech services like Block's Cash App, Marqeta (NASDAQ: MQ) provides a cloud-based platform that allows businesses to create customized payment card programs and process card transactions.
Why Does MQ Fall Short?
- Annual revenue growth of 6.3% over the last two years was well below our standards for the software sector
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 5.3 percentage points
At $4.06 per share, Marqeta trades at 2.5x forward price-to-sales. Check out our free in-depth research report to learn more about why MQ doesn’t pass our bar.
Procore Technologies (PCOR)
Market Cap: $7.56 billion
With a mission to build software for the people that build the world, Procore Technologies (NYSE: PCOR) provides cloud-based software that enables owners, contractors, and other stakeholders to collaborate and manage construction projects from any device.
Why Do We Think Twice About PCOR?
- Customers were hesitant to make long-term commitments to its software as its 14.9% average ARR growth over the last year was sluggish
- Estimated sales growth of 13% for the next 12 months implies demand will slow from its two-year trend
- Suboptimal cost structure is highlighted by its history of operating margin losses
Procore Technologies is trading at $50.00 per share, or 5.2x forward price-to-sales. To fully understand why you should be careful with PCOR, check out our full research report (it’s free).
One Software Stock to Watch:
Freshworks (FRSH)
Market Cap: $2.38 billion
Starting as a customer service solution before expanding into a comprehensive software suite, Freshworks (NASDAQ: FRSH) provides AI-powered software-as-a-service solutions that help companies manage customer service, IT support, sales, and marketing functions.
Why Does FRSH Stand Out?
- Software offerings and brand resonate with consumers, as seen in its above-market 25.8% annual sales growth over the last five years
- Software is difficult to replicate at scale and results in a top-tier gross margin of 85%
- Robust free cash flow margin of 25.7% gives it many options for capital deployment
Freshworks’s stock price of $8.60 implies a valuation ratio of 2.5x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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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.
