2 Software Stocks I Bought This Month
Ryan explores two software companies with promising characteristics
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On this week’s podcast, Ryan talked about two software stock he recently bought. Let’s go into a teaser on each.
Paycom Software offers software solutions for HR departments to manage payroll, employees, and hiring. It is a modern competitor to ADP (a little followed 100 bagger).
(All charts from our friends at Finchat.io)
The company has grown consistently over the past decade. Revenue has grown at close to 30% a year. This is rarified air. Growth has slowed a bit in recent years but still going strong.
The stock is in a 70% drawdown — its worst ever — because of investor fears over the saturation of a new product called BETI and the CEO selling a lot of stock. This new product apparently is so much better it reduces the usage of legacy products and saves customers a lot of time but also money. A headwind on growth, but great for customer loyalty.
The forward EV/EBIT is now under 15. Not bad.
Of course, there is more to a stock than a cheap looking multiple and fast growing historical revenue. Ryan explains more in this episode.
The second stock is Semrush Holdings. A different investment thesis than Paycom as it is more of an early-stage company. Ryan is betting on his anecdotal evidence with the product, a large runway for growth, and a small market cap.
Call it a Peter Lynch-style investment.
Semrush’s gross profit has grown at a 36% annual clip since 2019.
The price-to-gross profit (P/GP) is around 7.
For someone that believes in long-term growth and margin expansion, this could be a cheap gross profit multiple to enter in at.
Listen to the full podcast for the overviews of the stocks!
Brett
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Would you say Semrush is easily replaceable with AI?