Software is rapidly reducing operating expenses for businesses. In the past, the undeniable tailwinds fueling SaaS companies led to lofty valuation multiples that made it easier to raise capital. But this was a double-edged sword as the high prices exposed them to big drawdowns, and unfortunately, the industry has tumbled by 22% over the last six months. This performance is a stark contrast from the S&P 500’s 6% gain.
However, some businesses can support their premium valuations with superior earnings growth, and our mission at StockStory is 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 passing on.
Two Software Stocks to Sell:
Procore Technologies (PCOR)
Market Cap: $8.12 billion
With a mission to build software for the people that build the world, Procore Technologies (NYSE: PCOR) provides cloud-based software that enables owners, contractors, and other stakeholders to collaborate and manage construction projects from any device.
Why Do We Think Twice About PCOR?
- Average ARR growth of 14.8% over the last year has disappointed, suggesting it’s had a hard time winning long-term deals and renewals
- Estimated sales growth of 12.9% for the next 12 months implies demand will slow from its two-year trend
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
Procore Technologies is trading at $51.93 per share, or 5.3x forward price-to-sales. Dive into our free research report to see why there are better opportunities than PCOR.
Dolby Laboratories (DLB)
Market Cap: $6.08 billion
Known for its iconic "D" logo that appears before countless movies and TV shows, Dolby Laboratories (NYSE: DLB) designs and licenses audio and video technologies that enhance entertainment experiences in movies, TV shows, music, and other media.
Why Should You Sell DLB?
- Annual revenue growth of 1.2% over the last five years was well below our standards for the software sector
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Efficiency has decreased over the last year as its operating margin fell by 2.2 percentage points
Dolby Laboratories’s stock price of $63.70 implies a valuation ratio of 4.5x forward price-to-sales. Check out our free in-depth research report to learn more about why DLB doesn’t pass our bar.
One Software Stock to Buy:
SentinelOne (S)
Market Cap: $4.55 billion
Built on the principle of "fighting machine with machine," SentinelOne (NYSE: S) provides an AI-powered cybersecurity platform that autonomously prevents, detects, and responds to threats across endpoints, cloud workloads, and identity systems.
Why Should You Buy S?
- Customers view its software as mission-critical to their operations as its ARR has averaged 24.6% growth over the last year
- Estimated revenue growth of 20.1% for the next 12 months implies its momentum over the last two years will continue
- Free cash flow margin is anticipated to expand by 3.4 percentage points over the next year, providing additional flexibility for investments and share buybacks/dividends
At $13.34 per share, SentinelOne trades at 4x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.
