DND:CC - 3 Undervalued Software Stocks Set to Jump in 2024
2024-02-08 20:15:00 ET
Tech stocks may be climbing back from bottoming out, but when it comes to software stocks there are still a lot of gains to be made. After so many cuts over the last year, looking ahead, these software stocks are looking quite undervalued. Profit is bound to come for many, but especially the three software stocks we’re going to cover today.
So if you’re looking for substantial growth not just this year, but for several years to come, definitely consider these three on the TSX today.
Dye & Durham
Dye & Durham ( TSX:DND ) was once a heavy hitter, seen as potentially a software stock with the most stable set of cashflows. The company provides its software to law firms, government agencies, charities and the like. These are often long-term contracts, offering stable cash flows.
Yet after increasing pricing by a substantial amount, one of the first tech stocks to do so, shares plunged. And since then, shares haven’t really recovered. DND stock now remains quite undervalued in the opinion of analysts. And investors should consider it once more.
In fact, DND stock recently reported it would be buying back shares at a price of $12.10 per share totalling $126 million. So management clearly believes DND stock can come back to greatness, with shares now at $13 as of writing. Analysts think even more is on the way, with DND stock holding a consensus price target of $23 as of writing. So certainly keep this software stock on your radar.
Kinaxis
Another software stock to consider is Kinaxis ( TSX:KXS ), with the supply-chain management software company also seeing shares collapse during the last few years. Yet the tech stock really didn’t deserve the drop, given that it operates with long-term contracts from some of the largest enterprise companies in the world.
In fact, the large majority of its revenue comes from subscriptions, with the rest from professional services. It’s also worth noting that Kinaxis stock was ahead of the curve when it came to implementing artificial intelligence (AI) into its business. The company’s RapidResponse program allows it to identify not just current issues for companies, but potential ones down the road.
Yet shares of Kinaxis stock remain undervalued, with shares at just $157 as of writing. Analysts now give it a consensus price target of $220 today. And this looks quite likely, as once inflation and interest rates go down and consumption goes up, the supply-chain company will need to be running on all cylinders.
OpenText
Finally, OpenText ( TSX:OTEX ) is another absolutely undervalued software stock. The company develops and sells enterprise information management software, and its future also lies within AI. The main purpose of the company is content and data management for large companies and government agencies. And it has become incredibly good at it, as many Canadian investors have seen over the years.
However, AI is about to create an even bigger opportunity for the stock. OpenText stock is now spending money on expanding its AI capabilities through several vectors it aims to launch over the next few years, with one already underway. Further, it is also spending on penetrating more of the U.S. market, where there is a large opportunity.
Yet again, OpenText stock is quite valuable. Cloud bookings rose, and over US$2 billion came in from selling part of its Micro Focus business. Yet the company still saw shares drop during its recent earnings report. This came from lower earnings before interest, taxes, depreciation and amortization (EBITDA), and no guidance increase.
Yet management states there will be an increase, and it wants to make sure it follows through with that guidance. Furthermore, buybacks are also in the near future. So with shares at $55 as of writing, and trading at 2 times sales, it’s definitely a software stock to have on the books.
The post 3 Undervalued Software Stocks Set to Jump in 2024 appeared first on The Motley Fool Canada .
Fool contributor Amy Legate-Wolfe has positions in Kinaxis. The Motley Fool recommends Kinaxis. The Motley Fool has a disclosure policy .
2024