Software is rapidly reducing operating expenses for businesses. Companies bringing it to life have been rewarded with explosive earnings growth, and the upward trend shows no signs of stopping as the industry has posted a 56.3% gain over the past six months, beating the S&P 500 by 44.2 percentage points.
However, only a handful of companies will ultimately thrive over the long term as the low barriers to entry for software businesses lead to fierce competition. Taking that into account, here is one resilient software stock at the top of our wish list and two that may face trouble.
Two Software Stocks to Sell:
Asana (ASAN)
Market Cap: $2.26 billion
Born from the founders' frustration with the inefficiencies of email-based collaboration at Facebook, Asana (NYSE:ASAN) provides a work management platform that helps organizations track projects, set goals, and manage workflows in a centralized digital workspace.
Why Is ASAN Risky?
- Underwhelming ARR growth of 9.5% over the last year suggests the company faced challenges in acquiring and retaining long-term customers
- Platform has low switching costs as its net revenue retention rate of 96.5% demonstrates high turnover
- Software platform has intricate integration requirements for its enterprise clients, triggering long sales cycles that limit new customer additions
Asana is trading at $9.79 per share, or 2.6x forward price-to-sales. Check out our free in-depth research report to learn more about why ASAN doesn’t pass our bar.
Autodesk (ADSK)
Market Cap: $48.16 billion
Starting with AutoCAD in the 1980s and evolving into a comprehensive design ecosystem, Autodesk (NASDAQ:ADSK) provides software solutions for architecture, engineering, construction, manufacturing, and entertainment industries to design, simulate, and visualize projects.
Why Does ADSK Fall Short?
- Revenue increased by 14% annually over the last five years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
- Free cash flow margin is forecasted to shrink by 4.4 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
At $230.21 per share, Autodesk trades at 5.6x forward price-to-sales. Read our free research report to see why you should think twice about including ADSK in your portfolio.
One Software Stock to Watch:
Zeta Global (ZETA)
Market Cap: $8.48 billion
Powered by an AI engine that processes over one trillion consumer signals monthly, Zeta Global (NYSE:ZETA) operates a data-driven cloud platform that helps companies target, connect, and engage with consumers through personalized marketing across channels like email, social media, and video.
Why Does ZETA Stand Out?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 38.7% over the last year
- Market share will likely rise over the next 12 months as its expected revenue growth of 24.6% is robust
- Free cash flow margin is anticipated to expand by 1.5 percentage points over the next year, providing additional flexibility for investments and share buybacks/dividends
Zeta Global’s stock price of $33.79 implies a valuation ratio of 4.4x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.