Don’t Want To Overpay For SaaS Stocks? Try Alarm.com, Qualys & RealPage

Software, and more specifically software as a service (SaaS), has emerged as one of the hottest sectors this year, as investors shifted focus to asset-light, high-growth companies that have seen demand hold up despite Covid-19. That being said, investors are paying a big premium for growth, with valuations in the sector looking stretched. However, in our indicative theme High Growth Software Stocks At A Fair Price we’ve picked a few software stocks that have been posting healthy Revenue and Margin growth and yet are trading at relatively attractive valuations. Within the theme, Alarm.com (ALRM) has fared the best rising by over 50% year to date, while Mimecast Limited (MIME) has fared the worst and is down slightly year-to-date. View our theme High Growth Software Stocks At A Fair Price for the full list of stocks and the specific selection criteria.

Alarm.com (ALRM) provides cloud-based software services that enable homeowners to lock doors, manage thermostats, and monitor their homes via video. While a bulk of the company’s business comes from the smart home space, it has been focusing on the commercial space as well. The stock is up by 51% this year.

ALRM

Qualys, Inc. (QLYS) provides cloud security, compliance, and related software products. While the company’s growth rates are lower than peers in the cybersecurity space, it remains profitable, unlike many other SaaS players. The stock is up 14% year-to-date.

RealPage (RP) offers software as a service solution for property and real estate management. While the company is likely to face some near-term headwinds due to a mixed rental market, it should benefit in the long-term, as demand for online property management picks up. The stock has gained 12% this year.

Mimecast Limited (MIME) develops cloud security and risk management services for email and corporate data.   The company’s business could stand to gain in the long-run, as the trends of remote working and greater digitization force companies to invest more in security software. The stock is down by about -2% this year.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio to beat the market, with over 100% return since 2016, versus about 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.

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