1 Software Stock with Exciting Potential and 2 We Brush Off

Software is rapidly reducing operating expenses for businesses. 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 15.8% over the past six months. This drawdown is a noticeable divergence from the S&P 500’s 7.9% return.

A cautious approach is imperative when dabbling in these businesses as the best will deliver robust earnings growth while the rest will be disrupted by competition and AI. On that note, here is one resilient software stock at the top of our wish list and two that may face trouble.

Two Software Stocks to Sell:

Tenable (TENB)

Market Cap: $2.35 billion

Starting with the widely-used Nessus vulnerability scanner first released in 1998, Tenable (NASDAQ:TENB) provides exposure management solutions that help organizations identify, assess, and prioritize cybersecurity vulnerabilities across their IT infrastructure and cloud environments.

Why Are We Cautious About TENB?

1. Customers had second thoughts about committing to its platform over the last year as its average billings growth of 6.9% underwhelmed
2. Estimated sales growth of 6.8% for the next 12 months implies demand will slow from its two-year trend
3. Operating margin improvement of 3.4 percentage points over the last year demonstrates its ability to scale efficiently

Tenable’s stock price of $21.34 implies a valuation ratio of 2.4x forward price-to-sales. Dive into our free research report to see why there are better opportunities than TENB.

Varonis Systems (VRNS)

Market Cap: $3.21 billion

Beginning with protecting Windows file shares in 2005 and evolving into a comprehensive security platform, Varonis Systems (NASDAQ:VRNS) provides data security software that helps organizations protect sensitive information, detect threats, and comply with privacy regulations.

Why Do We Think VRNS Will Underperform?

1. Revenue increased by 16.1% annually over the last five years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
2. Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
3. Efficiency has decreased over the last year as its operating margin fell by 2.5 percentage points

At $28.46 per share, Varonis Systems trades at 4.3x forward price-to-sales. Check out our free in-depth research report to learn more about why VRNS doesn’t pass our bar.

One Software Stock to Buy:

CLEAR Secure (YOU)

Market Cap: $5.73 billion

Recognized by its signature blue lanes and biometric pods at airport checkpoints across America, CLEAR Secure (NYSE:YOU) provides biometric identity verification technology that allows subscribers to bypass regular security lines at airports and access secure experiences at various venues.

Why Should You Buy YOU?

1. Market share has increased as its 33.8% annual revenue growth over the last five years was exceptional
2. Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
3. YOU is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders

CLEAR Secure is trading at $56.76 per share, or 5.1x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.

Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.

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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.