American Software, Inc.: $15 Cloud Stock Up 50% in 2019, Poised to Double

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American Software, Inc. Looks Even Stronger in 2020

American Software, Inc. (NASDAQ:AMSWA) has been having a great year, with the AMSWA stock price up more than 10% year-over-year and up 50% year-to-date. And its future looks even brighter.

American Software has successfully transitioned into a cloud-based company, recently reporting strong revenue growth in key areas, welcoming a number of new customers, and expanding its relationships with existing customers.

That’s just the kind of sentiment to drive American Software stock high.

AMSWA Stock Overview

American Software, Inc. develops and markets supply chain management and enterprise software solutions.

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The Atlanta-based company operates three business segments: “Supply Chain Management,” “Enterprise Resource Planning,” and “Information Technology (IT) Consulting.” (Source: “Form 10-K,” American Software, Inc., last accessed September 11, 2019.)

The company’s Supply Chain Management segment provides, as its name implies, supply chain optimization and retail planning solutions to medium and large companies, including Fortune 500 companies.

The Enterprise Resource Planning division involves customer order processing, e-commerce solutions, financial services, and purchasing and materials management.

The IT Consulting segment provides consulting, customer education, documentation, maintenance, software enhancements, support services, and updates.

American Software, Inc.’s customers include big names like Sonoco LP (NYSE:SUN), Verizon Communications Inc. (NYSE:VZ), and Nestle SA (OTCMKTS:NSRGY, SWX:NESN).

AMSWA Stock Information
Market Cap $501.5 Million
52-Week High $16.06
52-Week Low $8.99
Shares Outstanding 29.5 Million
Float 26.9 Million
50-Day Moving Average $13.98
200-Day Moving Average $13.09

(Source: “American Software, Inc. (AMSWA),” Yahoo! Finance, last accessed September 11, 2019.)

American Software stock has been on a solid trajectory all year. It entered 2019 trading at $10.03, and on August 30 it hit a new 52-week high of $16.06, for a year-to-date gain of 60%.

The surge in AMSWA stock was fueled by solid first-quarter financial results and a strong outlook. In hitting a new 52-week high, the stock blew past a tested resistance level at $14.50. American Software has since given up short-term ground to profit-taking and overall investor sentiment, but its share price remains above the $14.50 resistance level.


Chart courtesy of StockCharts.com

Q1 2020 Results Show Areas of Key Growth

On August 28, American Software, Inc. announced its preliminary financial results for the first quarter of fiscal 2020, ended July 31. First-quarter revenue was essentially flat year-over-year at $27.4 million. But key areas showed significant growth. (Source: “American Software Reports Preliminary First Quarter of Fiscal Year 2020 Results,” American Software, Inc., August 28, 2019.)

Subscription fees increased 41% over the same prior-year period to $4.5 million. Software license revenue grew four percent to $1.8 million, a positive reflection of the company’s continued transition to a software-as-a-service (SaaS) model. American Software’s cloud services annual contract value advanced 54% to $20.3 million.

Recurring revenue for the company’s “Maintenance and Subscription Cloud Services” was 56% of its total revenue, versus 54% in the same period last year.

Maintenance revenue for the first quarter slipped four percent to $11.0 million, while “Professional Services” and other revenue was down eight percent to $10.1 million.

American Software reported first-quarter net income of $1.2 million ($0.04 per diluted share), a 17% drop from the $1.4 million (also $0.04 per diluted share) in the same prior-year period. Adjusted income was $2.1 million ($0.06 per share), compared with $2.2 million ($0.07 per share) in the first quarter of last year.

Earnings before interest, tax, depreciation, and amortization (EBITDA) increased 26% to $3.0 million, up from $2.4 million in the same period last year. Adjusted EBITDA was up 24% at $3.5 million, compared to $2.8 million in the first quarter of 2019.

American Software, Inc. ended the quarter with cash and investments of about $88.0 million. The company also remains debt-free.

Analyst Take

Big tech stocks have been pushing the broader stock market higher. But there are also a lot of excellent, smaller, under-the-radar tech stocks like American Software stock that have been quietly rewarding buy-and-hold investors.

There’s no secret sauce for the company’s ongoing success. American Software, Inc. is simply a solid, well-run company with a strong client retention rate and recurring revenue stream. It has been adding new clients, expanding its relationships with existing clients, and inking SaaS subscription and software license agreements with customers around the world.

That bodes well for American Software and its shareholders.