From commerce to culture, software is digitizing every aspect of our lives. 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 41.2% gain over the past six months, beating the S&P 500 by 29.2 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. On that note, here are two software stocks boasting durable advantages and one that may face trouble.
One Software Stock to Sell:
Rapid7 (RPD)
Market Cap: $746.1 million
With its name inspired by the need for quick responses to cyber threats, Rapid7 (NASDAQ:RPD) provides cybersecurity software and services that help organizations detect vulnerabilities, monitor threats, and respond to security incidents.
Why Do We Pass on RPD?
- Customers had second thoughts about committing to its platform over the last year as its billings averaged 2.7% declines
- Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
- Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 1.5 percentage points
Rapid7 is trading at $11.12 per share, or 1x forward price-to-sales. Check out our free in-depth research report to learn more about why RPD doesn’t pass our bar.
Two Software Stocks to Watch:
Dynatrace (DT)
Market Cap: $14.7 billion
With its platform processing over 30 trillion pieces of IT performance data daily, Dynatrace (NYSE:DT) provides an AI-powered platform that helps organizations monitor, secure, and optimize their applications and IT infrastructure across cloud environments.
Why Are We Positive on DT?
- ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
- Software is difficult to replicate at scale and results in a stellar gross margin of 81.6%
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Dynatrace’s stock price of $51.49 implies a valuation ratio of 6.5x forward price-to-sales. Is now a good time to buy? See for yourself in our full research report, it’s free.
monday.com (MNDY)
Market Cap: $3.99 billion
With its colorful interface of boards, columns, and automation that replaced the chaos of spreadsheets, monday.com (NASDAQ:MNDY) is a cloud-based work operating system that helps teams manage projects, track tasks, and streamline workflows through customizable interfaces.
Why Will MNDY Outperform?
- Ability to secure long-term commitments with customers is evident in its 24.3% ARR growth over the last year
- Software is difficult to replicate at scale and results in a best-in-class gross margin of 88.7%
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
At $95.38 per share, monday.com trades at 2.7x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 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-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.