With impressive growth, recurring revenue, and strong margins, these stocks look like good bets to add value to your portfolio through 2022 and beyond. The current market environment has created an opportunity to invest in some compelling software companies at prices that are much lower than they were just a few months ago. While DigitalOcean is not yet profitable, it trades at a price-to-sales multiple of 9, which isn't bad for a fast-growing software stock. As such, like Adobe, the company has an impressive net dollar retention rate of well over 100% at 116%. This indicates that these users are willing to spend more on DigitalOcean over time as they grow with the company. While they start out as lower-spending customers, DigitalOcean says that 94% of its high-value customers started out through self-service. What I like is that DigitalOcean acquires the majority of these customers using a cheap and efficient "self serve" model: Customers come to the website to learn about a tool and then use it, negating the need for an expensive salesforce. It offers infrastructure and tools to independent developers and developers at companies that are too small for the big cloud providers to focus on. Furthermore, a top software stock like Adobe almost always comes with a premium valuation, so the current sell-off probably offers as good a time as any to add this market leader to your portfolio for the long term. While Adobe isn't cheap at 37 times earnings, the valuation does come down to 24 times forward earnings based on next year's estimates. This means that it does not lose many customers (thus retaining the recurring revenue it brings in each year) and on top of that, it is gaining 25% more revenue from these customers. Net dollar retention is a key metric for evaluating software companies, and Adobe's net dollar retention rate is an incredible 125%. Revenue for this segment grew by 17% in the most recent quarter.Īdobe has gross margins of 87.9%, among the best in the entire software industry (which is saying something because the space is already known for strong margins). ![]() Adobe has a wide moat as the category's creator and it's the industry standard that professionals are already familiar with.Īdobe's growing Digital Experience business centered around digital marketing could be a significant growth driver for years to come. Different Tutorials like photo manipulation, photo editing and many more using adobe. This is a highly profitable business that just grew revenue 15% year over year in the most recent quarter despite being around for a long time. ill show you guys many ways to use adobe photoshop.
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