We recently compiled a list of the 8 High Growth Software Stocks That Are Profitable In 2024. In this article, we are going to take a look at where Global Payments Inc. (NYSE:GPN) stands against the other high growth software stocks.
The Software Industry: An Analysis
The software market is experiencing robust growth, driven by various trends and technological advancements. According to Precedence Research, the global software market size reached $659.17 billion in 2023. Looking forward, the market is expected to grow at a compound annual growth rate (CAGR) of 11.8% during 2024 – 2034 to reach $2.24 trillion by the end of the forecast period. In 2023, the North American region led the software market, holding a substantial share of 44%. The Asia-Pacific region is expected to witness significant growth during the forecast period.
A key factor influencing the market is the rise of artificial intelligence (AI). AI technologies are being integrated into software solutions to enhance efficiency and automate repetitive tasks. A study from Salesforce reveals that 85% of IT leaders expect AI to boost developer productivity over the next three years. This expectation underscores the growing recognition of AI’s role in streamlining workflows and optimizing software performance.
Another significant trend is the shift towards cloud-based software. Companies are migrating from traditional on-premises solutions to cloud services due to their flexibility, scalability, and cost-effectiveness. This transition allows businesses to access applications remotely and across various devices, which has become crucial in today’s digital landscape.
The 2024 AlgoSec State of Network Security report highlights a notable shift towards multi-cloud environments. The research, based on surveys conducted in H2 of 2022 and 2023, evaluated major players like AWS and Microsoft Azure. It indicates that security, continuity, and compliance are key factors driving organizations to adopt cloud platforms. While cloud adoption is growing, Azure remains the most popular platform, with AWS rapidly gaining ground.
The report also reveals that the move to remote work has significantly boosted Software-Defined Wide Area Networks (SD-WAN) deployment, dropping the percentage of organizations without SD-WAN from 55.2% in 2022 to 34% in 2023. Secure Access Service Edge (SASE) has become a popular solution for organizations by consolidating security functions into a unified cloud service. Additionally, firewall implementation has surged, with only 7.1% of respondents reporting no firewalls in 2023, down from 28.4% in 2022. This trend reflects a growing focus on securing cloud networks against external threats.
With an overview of the global software market in mind, let’s take a look at the 8 high-growth software stocks that are profitable in 2024.
Methodology
To compile our list of the 8 high-growth software stocks that are profitable in 2024, we used stock screeners from Finviz and Yahoo Finance. We sorted our results based on market capitalization and picked the top 50 largest software companies by market cap.
To narrow down our list to high-growth software stocks, we focused on companies with a compound annual growth rate (CAGR) in net revenue exceeding 18% over the past 5 years.
Next, we focused on profitability. From this initial list of high-growth software stocks, we narrowed our choices to stocks that had positive trailing twelve-month (TTM) net income and stocks that have grown their net income positively over the past 5 years.
To ensure the reliability of our findings, we consulted reputable sources such as SeekingAlpha, which provided insights into the net income CAGR and revenue CAGR over the past five years, and YCharts, which offered information on TTM net income.
Finally, from this list of high-growth software stocks that met our criteria, we focused on the top 8 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s database of 912 elite hedge funds. The 8 high-growth software stocks that are profitable in 2024 are ranked below in ascending order based on the number of hedge funds holding stakes in them as of Q2 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A payment terminal in action with customers apart of the experience.
Global Payments Inc. (NYSE:GPN)
TTM Net Income: $1.41 Billion
5-Year Net Income CAGR: 23.85%
5-Year Revenue CAGR: 22.72%
Number of Hedge Fund Holders: 66
Global Payments Inc. (NYSE:GPN) is an American payments technology company that offers innovative software and services to clients worldwide. The company specializes in providing a comprehensive range of solutions that help businesses operate more efficiently across various channels. It delivers tailored technology designed for various industries. The company’s unique end-to-end global commerce platform operates in over 100 countries, enabling clients to streamline their payment processes and enhance customer experiences.
At its recent 2024 Investor Conference, the company outlined a clear strategy aimed at becoming the preferred partner for commerce solutions worldwide. Global Payments Inc. (NYSE:GPN) plans to unify its Merchant Solutions globally under a common brand, Genius. The company will be focusing on small and medium-sized businesses (SMBs) to provide its comprehensive suite of software and commerce solutions. Additionally, Global Payments Inc. (NYSE:GPN) is capitalizing on growth opportunities in its Issuer Solutions segment through cloud modernization and cross-selling initiatives, while also evaluating options to enhance shareholder value.
Global Payments Inc. (NYSE:GPN) anticipates that its operational transformation initiatives will unlock over $500 million in adjusted run-rate operating income benefits by mid-2027. With a strong business model and robust free cash flow generation, the company aims to return $7.5 billion to shareholders over the next three years.
The company is actively enhancing its market position by expanding its point-of-sale solutions and entering new partnerships. Recently, Global Payments Inc. (NYSE:GPN) announced an agreement with Diamond Baseball Holdings to become the official commerce technology partner for its Minor League Baseball franchises in the US and Canada. Additionally, the company has secured new stadium partnerships with several UK football clubs, including Newcastle, Birmingham City, and Nottingham Forest.
Global Payments Inc. (NYSE:GPN) reported strong performance for Q2 2024, with GAAP revenue reaching $2.57 billion, a 5% increase year-over-year. The company also reported GAAP diluted earnings per share (EPS) of $1.47, marking a significant 40% rise from the previous year.
With a focus on operational transformation and strategic growth, the company is well-positioned to capitalize on future opportunities, making it an attractive stock for potential investors. Analysts have a positive outlook on GPN, with a 12-month median price target of $130.00. This suggests a potential increase of 26.42% from the current stock price.
As one of the most profitable high-growth stocks, Global Payments Inc. (NYSE:GPN) has managed to grow its top line at a compound annual growth rate (CAGR) of 22.72% over the past five years, while its bottom line has increased at a CAGR of 23.85% during the same period.
According to Insider Monkey’s Q2 database of over 900 hedge funds, 66 hedge funds held stakes in Global Payments Inc. (NYSE:GPN) in the second quarter of 2024.
Overall GPN ranks 4th on our list of the high growth software stocks that are profitable in 2024. While we acknowledge the potential of GPN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GPN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.