Software is eating the world, and virtually no business is left untouched by it. The undeniable tailwinds fueling SaaS companies have led to lofty valuation multiples historically, but rich prices also make re-ratings harder and place a ceiling on returns - over the past six months, the industry’s 2.3% gain has lagged the S&P 500 by 9 percentage points.
Investors should tread carefully as only some businesses are worthy of their valuations, and luckily for you, we started StockStory to help you find them. Keeping that in mind, here is one software stock poised to generate sustainable market-beating returns and two we’re swiping left on.
Two Software Stocks to Sell:
C3.ai (AI)
Market Cap: $2.13 billion
Named after the three Cs of its original focus—carbon, cloud computing, and customer relationship management—C3.ai (NYSE:AI) provides enterprise AI software that helps organizations develop, deploy, and operate large-scale artificial intelligence applications across various industries.
Why Are We Out on AI?
- Annual revenue growth of 11.9% over the last three years was below our standards for the software sector
- Gross margin of 56.6% reflects its high servicing costs
- Cash burn makes us question whether it can achieve sustainable long-term growth
C3.ai’s stock price of $15.50 implies a valuation ratio of 6.7x forward price-to-sales. Check out our free in-depth research report to learn more about why AI doesn’t pass our bar.
Olo (OLO)
Market Cap: $1.74 billion
Processing over two million orders daily across 80,000 restaurant locations nationwide, Olo (NYSE:OLO) provides an enterprise-grade SaaS platform that powers digital ordering, delivery, and payment systems for restaurant brands across the United States.
Why Is OLO Not Exciting?
- Gross margin of 53.3% is way below its competitors, leaving less money to invest in areas like marketing and R&D
- Suboptimal cost structure is highlighted by its history of operating margin losses
At $10.25 per share, Olo trades at 5.1x forward price-to-sales. Read our free research report to see why you should think twice about including OLO in your portfolio.
One Software Stock to Watch:
PTC (PTC)
Market Cap: $25.55 billion
Originally known as Parametric Technology Corporation until its 2013 rebranding, PTC (NASDAQ:PTC) provides software that helps manufacturers design, develop, and service physical products through digital solutions for CAD, PLM, ALM, and SLM.
Why Could PTC Be a Winner?
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
- Highly efficient business model is illustrated by its impressive 30% operating margin, and its profits increased over the last year as it scaled
- Robust free cash flow margin of 34.4% gives it many options for capital deployment
PTC is trading at $212.96 per share, or 9.3x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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