Software is eating the world, and virtually no business is left untouched by it. 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 44.6% gain over the past six months, beating the S&P 500 by 32.9 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. With that said, here are two resilient software stocks at the top of our wish list and one we would avoid.
One Software Stock to Sell:
F5 (FFIV)
Market Cap: $21.67 billion
Originally named after the F5 tornado, the most powerful on the meteorological scale, F5 (NASDAQ:FFIV) provides security and delivery solutions that protect applications across cloud, data center, and edge environments for large organizations.
Why Do We Think Twice About FFIV?
- Average billings growth of 11.3% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
- Estimated sales growth of 7.6% for the next 12 months implies demand will slow from its two-year trend
- Operating margin failed to increase over the last year, indicating the company couldn’t optimize its expenses
At $401.38 per share, F5 trades at 6.2x forward price-to-sales. Dive into our free research report to see why there are better opportunities than FFIV.
Two Software Stocks to Watch:
JFrog (FROG)
Market Cap: $11.03 billion
Named after the amphibian that continuously evolves from egg to tadpole to adult, JFrog (NASDAQ:FROG) provides a platform that helps organizations securely create, store, manage, and distribute software packages across any system.
Why Are We Bullish on FROG?
- Billings have averaged 31.5% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
JFrog is trading at $94.50 per share, or 15.5x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Toast (TOST)
Market Cap: $21.27 billion
Born from the frustrations of three friends waiting too long for their restaurant bill, Toast (NYSE:TOST) provides a cloud-based digital technology platform with software, payment processing, and hardware solutions built specifically for restaurants.
Why Does TOST Stand Out?
- Ability to secure long-term commitments with customers is evident in its 26.5% ARR growth over the last year
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
Toast’s stock price of $37.01 implies a valuation ratio of 2.7x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating 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-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.