The growth of software varies from year to year, depending on the various factors, where software companies are the leading one among the other companies. In 2017, after the tough year of 2016, three factors have been shifted in the favor of software sector so that it would set for the better performance in this year. The three key factors are strong demand, reasonable valuations and positive margin trends are the main reason for the recovery of software growth in 2017. This paves way for the strong secular growth of the software companies said by software sector analyst Keith Weiss and Morgan Stanley, therefore investors should keep eye on these three factors for the software group.
What are the key factors for the development of software sectors?
Most of the enterprise software applications focus on automation or analyzing the data from the transactions. By deeper workflow automation results in improved efficiency and many of the CIOs plans to shift to the new investment of building apps which will automate the workflow and also coordinate resources around them and so investors should look into the companies about their goals. Top line growth across the cyber security group has seen slowed during 2016. But now there is secular positioning of security and the companies are situated to combine various functions into the broader security platform so that to drive effective and efficient spending on cyber security and also the business people who can make a safe investment such as cloud and mobile in order to execute than the overall group. The next thing for growth of software is that to refocus on the small and the midsized business which gives the well penetrated market opportunity for software development. Software providers help their customer in the niche market so they can solve their business challenges in an easy way and it also provides effective solutions, which could sustain the growth of the software sector. Development in Artificial intelligence will unlock some new capabilities for the software based solutions where it was existed previously in the realm of human labor. Cloud platform providers are still providing the AI tool parts and many software companies are integrated the growth capabilities so that to represent the best software plays. The second positive factor for the development of software sector is the attractive market valuations. The current market value should be known and according to that software companies should increase their goals so that they can increase their market capitalization.
Increase in market capitalization of software companies
Finally, the whole software sector is sitting on the underutilized balance sheets and the consolidated ratio of net dept to the earnings before taxes, interest, amortization and depreciation is 1.0 across large capitalization software companies, whereas the broader market average is about 1.8 times. The software group is flushed with cash, where across the entire group the net cash is almost 7% of their capitalization