Software Industry Report
Market Cap: $5.9T
Stocks: 217
Median P/E: 21.0x
Median ROIC: 1.6%
Data sourced from SEC EDGAR filings. Report refreshed weekly.
Part of the Technology sector.
Performance Dashboard
| Period | Sector (MCW) | Sector (Median) |
|---|---|---|
| 1 Day | -0.2% | 0.0% |
| 1 Week | -1.9% | +3.0% |
| 1 Month | — | — |
| 3 Months | — | — |
| 6 Months | — | — |
| YTD | -0.6% | +0.3% |
| 1 Year | +3.9% | -23.2% |
| 3 Years | +160.4% | -18.6% |
| 5 Years | +89.8% | -55.7% |
Today's Breadth: 95 advancing · 78 declining · 20 flat
Valuation Summary
| Metric | Median | P25 | P75 | vs 5Y Avg |
|---|---|---|---|---|
| P/E | 21.0x | 0.0x | 35.0x | -17% |
| P/B | 3.5x | 0.9x | 8.8x | -39% |
| P/S | 2.8x | 0.5x | 6.5x | — |
| P/FCF | 18.3x | 8.6x | 33.9x | — |
| EV/EBITDA | 19.7x | 11.9x | 38.1x | — |
| EV/EBIT | 21.9x | 12.9x | 38.0x | — |
Earnings Yield
3.4%
FCF Yield
3.0%
Below Fair Value
70% of stocks
Profitability Profile
Margins
| Metric | Median | 5Y Avg | P25 | P75 |
|---|---|---|---|---|
| Gross Margin | 66.5% | 64.3% | 49.2% | 74.5% |
| Operating Margin | 1.9% | — | -10.6% | 16.1% |
| Net Margin | 0.8% | -7.3% | -9.1% | 13.4% |
| FCF Margin | 15.1% | — | 5.3% | 25.2% |
Returns on Capital
| Metric | Median | 5Y Avg | P25 | P75 |
|---|---|---|---|---|
| ROE | 0.0% | — | -21.5% | 16.4% |
| ROA | -0.2% | — | -9.2% | 7.5% |
| ROIC | 1.6% | -4.6% | -13.7% | 15.9% |
Growth Metrics
| Metric | 1Y | 3Y CAGR | 5Y CAGR |
|---|---|---|---|
| Revenue | +9.2% | +11.0% | +14.8% |
| EPS | +21.1% | +16.6% | +12.2% |
| Free Cash Flow | +19.9% | +18.2% | +16.6% |
All values represent sector median growth rates.
Balance Sheet Health
Debt / Equity
0.4x
Net Debt / EBITDA
-0.1x
Interest Coverage
2.8x
Current Ratio
1.4x
Altman Z-Score
Safe (>3): 70 (38%)
Gray (1.8–3): 32 (17%)
Distress (<1.8): 82 (45%)
Piotroski F-Score
Strong (7–9): 45 (21%)
Moderate (4–6): 125 (58%)
Weak (0–3): 46 (21%)
Top Companies
| Symbol | #▲ | Mkt Cap | P/E | EV/EBITDA | ROIC | Net Mgn | Rev Gr. | Div Yld | YTD | Qual. |
|---|---|---|---|---|---|---|---|---|---|---|
| MSFT | 1 | $2.9T | 36.1x | 22.3x | 38.2% | 36.1% | +14.9% | 0.7% | -0.6% | 6/9 |
| ORCL | 2 | $446.2B | 37.5x | 23.3x | 14.4% | 21.7% | +8.4% | 1.0% | -2.8% | 3/9 |
| PLTR | 3 | $341.4B | 299.5x | — | — | 36.3% | +56.2% | — | +1.0% | 3/9 |
| SAP | 4 | $197.5B | 34.6x | — | 22.8% | 19.9% | +12.8% | 1.1% | -3.0% | 6/9 |
| CRM | 5 | $165.2B | 29.2x | 19.0x | 10.3% | 18.0% | +9.6% | 0.7% | -2.0% | 5/9 |
| SHOP | 6 | $150.6B | 181.7x | — | 17.4% | 10.7% | +30.1% | — | +2.9% | 4/9 |
| INTU | 7 | $104.6B | 58.2x | 44.3x | 20.6% | 20.6% | +15.6% | 0.5% | +5.5% | 4/9 |
| ADBE | 8 | $102.5B | 19.2x | 14.3x | 56.8% | 30.0% | +10.5% | — | -1.3% | 8/9 |
| CRWD | 9 | $100.6B | — | — | -3.5% | -3.4% | +21.7% | — | -1.9% | 2/9 |
| NOW | 10 | $93.2B | 92.2x | 61.4x | 19.6% | 13.2% | +20.9% | — | -19.0% | 6/9 |
| CDNS | 11 | $78.7B | 78.5x | 48.6x | 57.0% | 20.9% | +14.1% | — | +1.2% | 5/9 |
| NTES | 12 | $71.8B | 13.7x | 10.8x | 24.2% | 28.2% | +0.2% | 2.8% | +2.3% | 8/9 |
| SNPS | 13 | $69.2B | 56.8x | 54.7x | 3.9% | 18.9% | +15.1% | — | +2.5% | 4/9 |
| NET | 14 | $64.9B | — | — | -3.0% | -4.7% | +29.9% | — | +8.0% | 1/9 |
| INFY | 15 | $58.1B | 23.2x | — | 33.6% | 16.4% | +3.9% | 3.3% | +1.8% | 4/9 |
| EA | 16 | $53.4B | 33.8x | 20.0x | 17.5% | 15.0% | -1.3% | 0.5% | +0.5% | 4/9 |
| ADSK | 17 | $48.8B | — | — | 34.0% | 15.6% | +17.5% | — | -1.1% | 5/9 |
| SNOW | 18 | $44.7B | — | — | -24.6% | -35.5% | +29.2% | — | -1.5% | 3/9 |
| XYZ | 19 | $39.9B | 31.6x | 17.8x | 8.7% | 5.4% | +0.3% | — | -0.2% | 5/9 |
| RBLX | 20 | $39.9B | — | — | -76.8% | -21.8% | +35.8% | — | -5.8% | 2/9 |
Industry Composition
| Industry | Stocks | Market Cap | % | |
|---|---|---|---|---|
| Services-Prepackaged Software | 175 | $5.7T | 96.3% | |
| Services-Computer Programming Services | 21 | $181.9B | 3.1% | |
| Software - Application | 15 | $35.7B | 0.6% | |
| Software - Infrastructure | 6 | $1.6B | 0.0% |
Quality Distribution
0
1
2
3
4
5
6
7
8
9
Quality Score (0-9)
High Quality (7+)
6%
Median Piotroski F
5/9
Profitable Years
2 of 10
Dividends & Shareholder Returns
Paying Dividends
12%
Median Div Yield
1.5%
Median Buyback Yield
1.1%
Shareholder Yield
1.5%
Payout Ratio
37.5%
Div Growth (3Y)
9.1%
Div Growth (5Y)
8.0%
Strengths & Weaknesses
Strengths
- +[Cash Flow]Robust cash generation improvement with a median 5-year FCF CAGR of 16.6%, supporting capital returns and reinvestment capacity.
- +[Growth]Strong secular growth with a median 5-year revenue CAGR of 14.8%, outpacing nominal GDP.
- +[Profitability]High pricing power with a median gross margin of 66.5%, reflecting differentiated products or strong brand moats.
- +[Valuation]Attractive valuations: current median P/E of 21.0x is 17.2% below the 5-year average, presenting potential value opportunity.
Weaknesses
- −[Financial Health]44.6% of companies fall in the Altman Z-Score distress zone (<1.8), indicating elevated bankruptcy risk within the sector.
- −[Leverage]Tight interest coverage at 2.8x, leaving limited cushion for debt servicing if earnings decline.
- −[Profitability]Below-average capital returns with a median ROIC of 1.6%, suggesting limited pricing power or capital-intensive operations.
- −[Profitability]Razor-thin net margins at a median of 0.8%, leaving little room for execution error or economic downturn.