2 A-Rated Small-Cap Software Stocks to Buy According to POWR Ratings
Rapid adoption of software solutions for business automation and to facilitate remote working are propelling the software industry’s growth. Similarly, emerging trends and breakthroughs in the software industry should help...
Rapid adoption of software solutions for business automation and to facilitate remote working are propelling the software industry's growth. Similarly, emerging trends and breakthroughs in the software industry should help the industry gain momentum this year. Therefore, we believe current market volatility offers an opportunity to bet on fundamentally sound small-cap software stocks Rimini Street (RMNI) and eGain (EGAN). These stocks are rated "A' in our proprietary rating system. Read on.
Several emerging trends and breakthroughs are driving the software industry's growth. Business development, centralized infrastructure, cloud on edge, development in low-code and no-code, the rise of microservices architecture, and various other trends are expected to keep the industry's momentum going.
Furthermore, the growing use of cloud-based platforms, due to benefits that include flexibility, cost-effectiveness, and mobility, has boosted the demand for cloud-based software solutions among most businesses. The spending in the software market is expected to reach $313.74 billion in 2022.
Given this backdrop, we think it could be wise to bet on small-cap stocks Rimini Street, Inc. (RMNI) and eGain Corporation (EGAN) amid the current market volatility. They are rated A (Strong Buy) in our proprietary POWR Ratings system and could deliver significant upside in the coming months.
Rimini Street, Inc. (RMNI)
With a $447.73 million market capitalization RMNI in Las Vegas is a global provider of enterprise software, products, and services that support various industries. The company offers software support services for Oracle and SAP enterprise software products. Its software support includes application and database management services, security solutions, cloud advisory, and other professional services. RMNI sells its solutions primarily in North America, Latin America, Europe, Africa, the Middle East, Asia, and the Asia-Pacific.
Last month, Staffmark Group, a staffing and recruitment firm, started leveraging RMNI to support the Staffmark Group's PeopleSoft system environment support and maintenance. RMNI believes that this should improve its competitive advantage and drive growth.
RMNI's revenue for the fiscal third quarter, ended Sept. 30, 2021, increased 15.9% year-over-year to $95.64 million. The company's gross profit grew 23.2% from its year-ago value to $62.27 million. Its operating income rose 66% from the prior-year quarter to $7.53 million. Also, the company's net income came in at $1.93 million during the period.
RMNI's revenue is expected to increase 11.9% year-over-year to $415.75 million in its fiscal 2022. Its EPS is expected to grow 210.5% in fiscal 2022. The stock has gained 4.5% in price over the past five trading days.
RMNI's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an A grade for Quality and a B for Growth and Value. We have also graded RMNI for Sentiment, Stability, and Momentum. Click here to access all RMNI's ratings. RMNI is ranked #3 of 171 stocks in the Software - Application industry.
eGain Corporation (EGAN)
Incorporated in 1997, Sunnyvale, Calif.-based EGAN is a software-as-a-service (SaaS) provider that serves in North America, Europe, the Middle East, Africa, and the Asia Pacific. The company offers unified cloud software solutions to automate, augment, and orchestrate customer engagement. It also provides solutions to customers in the financial, telecommunications, retail, government, and healthcare sectors. EGAN has a $324.24 million market capitalization.
Last month, EGAN achieved authorization from the Federal Risk and Authorization Management Program (FedRAMP) with Internal Revenue Service (IRS) sponsorship. This EGAN FedRAMP solution should uniquely enable government agencies to easily deliver digital-first experiences at scale, powered by AI, knowledge, and analytics.
During its fiscal first quarter, ended Sept. 30, 2021, EGAN's total revenue increased 12.5% year-over-year to $21.45 million. The company's gross profit grew 11.9% from its year-ago value to $16.15 million. Its income from operations came in at $691,000. Also, the company's net income amounted to $551,000during the period.
Analysts expect EGAN's revenue to increase 14.6% year-over-year to $89.72 million in its fiscal 2022. The company has surpassed the consensus EPS estimates in three of the trailing four quarters. Its EPS is expected to increase 333.3% in fiscal 2022. And the stock has surged 5.1% in price over the past nine months.
EGAN's POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. Also, the stock has an A grade for Sentiment and Quality and a B for Value.
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RMNI shares were trading at $5.26 per share on Tuesday morning, up $0.11 (+2.14%). Year-to-date, RMNI has declined -11.89%, versus a -5.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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