These software stocks have the 'best of both worlds,' offering strong growth with solid balance sheets

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As the artificial intelligence craze evolves, Canaccord Genuity thinks these software companies have strong fundamentals despite high interest rates.

As the artificial intelligence craze evolves, driving up growth for chipmakers like Broadcom and Nvidia , investors should also consider software companies seeing strong fundamentals despite high interest rates. Canaccord Genuity ran a screen of about 147 software companies, and only four had revenue growth of 25% or more forecast for the next 12 months and at least 50% incremental free-cash flow margins over the trailing 12 months.

com had a trailing incremental FCF margin of 91% and projected revenue growth of 28%. Canaccord cited high non-GAAP gross margins, durable growth and healthy FCF leverage over the trailing 12 months as drivers of Monday's "best-in-class" incremental FCF. The stock today trades at a 9.3 multiple of 2025 enterprise value to revenue and 38 times enterprise value to FCF, Canaccord said, and is higher by 30% in 2024.

 

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