From commerce to culture, software is digitizing every aspect of our lives. Companies bringing it to life have been rewarded with high valuation multiples that make fundraising easier, but they have weighed on the returns lately as the industry has pulled back by 2.1% over the past six months. This drop is a stark contrast from the S&P 500’s 14.1% gain.
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 boasting a durable advantage and two we’re passing on.
Two Software Stocks to Sell:
C3.ai (AI)
Market Cap: $2.08 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 Do We Pass on AI?
- Offerings struggled to generate meaningful interest as its average billings growth of 3.8% over the last year did not impress
- Bad unit economics and steep infrastructure costs are reflected in its gross margin of 51.8%, one of the worst among software companies
- Cash burn makes us question whether it can achieve sustainable long-term growth
C3.ai’s stock price of $15.05 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.
Manhattan Associates (MANH)
Market Cap: $10.83 billion
Built on a "versionless" cloud architecture that delivers quarterly updates to all customers, Manhattan Associates (NASDAQ: MANH) develops cloud-based software that helps retailers, wholesalers, and manufacturers manage their supply chains, inventory, and omnichannel operations.
Why Are We Wary of MANH?
- Average billings growth of 5% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
- Estimated sales growth of 5% for the next 12 months implies demand will slow from its two-year trend
- Gross margin of 56.5% is way below its competitors, leaving less money to invest in areas like marketing and R&D
Manhattan Associates is trading at $179.73 per share, or 9.7x forward price-to-sales. Dive into our free research report to see why there are better opportunities than MANH.
One Software Stock to Buy:
Samsara (IOT)
Market Cap: $25.94 billion
From sensors on vehicles to AI-powered cameras that help prevent accidents, Samsara (NYSE: IOT) is a cloud-based Internet of Things platform that helps businesses improve the safety, efficiency, and sustainability of their physical operations.
Why Should You Buy IOT?
- ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
- Operating margin expanded by 19.7 percentage points over the last year as it scaled and became more efficient
At $45.11 per share, Samsara trades at 13.1x forward price-to-sales. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Strong Momentum Stocks for this week. 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-micro-cap company Kadant (+351% 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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