NEW YORK (TheStreet) -- With Microsoft(MSFT) - Get Report recently launching Windows 10, we decided to check TheStreet Quant Ratings for stocks in the systems software subsector that would be good investments.

Windows 10 is one of Microsoft's biggest updates in years. The new upgrade focuses on attracting Windows 7 users who declined to update to Windows 8 and 8.1. The release of Windows 10 marks a change in strategy for the company from prior updates.

The upgrade is free for individual consumers, but the company will charge corporate enterprise users a fee. Microsoft is gearing to attract more consumers to use its operating system Windows 10 so that Microsoft may be able to sell more of Microsoft products and services, much like Google(GOOG) - Get Report does with its Android operating system.

So, what are the best systems software stocks investors should be buying? Here are the top three, according to TheStreet Ratings, TheStreet's proprietary ratings tool.

TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014, beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Check out which companies made the list. And when you're done, be sure to read about which managed health care stocks you should buy now. Year-to-date returns are based on July 29, 2015, closing prices. The highest-rated stock appears last.

SYMC data by YCharts
3. Symantec (SYMC) - Get Report
Rating: Buy, B+
Market Cap: $15.6 billion
Year-to-date return: -11%

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Symantec Corporation, together with its subsidiaries, provides security, backup, and availability solutions worldwide. Its products and services protect people and information in various environments from the mobile device and enterprise data center and to cloud-based systems.

"We rate SYMANTEC CORP (SYMC) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has slightly increased to $488.00 million or 8.68% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -29.04%.
  • The gross profit margin for SYMANTEC CORP is currently very high, coming in at 86.36%. Regardless of SYMC's high profit margin, it has managed to decrease from the same period last year.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.5%. Since the same quarter one year prior, revenues slightly dropped by 8.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.35, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.10 is sturdy.
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VDSI

data by

YCharts

2. VASCO Data Security International

(VDSI)


Rating: Buy, A-
Market Cap: $808.5 million
Year-to-date return: -27.5%

VASCO Data Security International, Inc., together with its subsidiaries, designs, develops, markets, and supports hardware and software security systems that manage and secure access to information assets worldwide.

"We rate VASCO DATA SEC INTL INC (VDSI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, reasonable valuation levels and solid stock price performance. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • VDSI's very impressive revenue growth greatly exceeded the industry average of 11.5%. Since the same quarter one year prior, revenues leaped by 67.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • VDSI has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.24, which clearly demonstrates the ability to cover short-term cash needs.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Software industry and the overall market, VASCO DATA SEC INTL INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Powered by its strong earnings growth of 277.77% and other important driving factors, this stock has surged by 129.91% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, VDSI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
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CHKP

data by

YCharts

1. Check Point Software Technologies

(CHKP) - Get Report


Rating: Buy, A-
Market Cap: $14.7 billion
Year-to-date return: 3.5%

Check Point Software Technologies Ltd. develops, markets, and supports a range of software, combined hardware, and software products and services for information technology (IT) security worldwide.

"We rate CHECK POINT SOFTWARE TECHN (CHKP) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, solid stock price performance and growth in earnings per share. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 11.5%. Since the same quarter one year prior, revenues slightly increased by 9.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CHKP has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, CHKP has a quick ratio of 1.61, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market, CHECK POINT SOFTWARE TECHN's return on equity exceeds that of both the industry average and the S&P 500.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 27.13% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CHKP should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • CHECK POINT SOFTWARE TECHN has improved earnings per share by 6.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CHECK POINT SOFTWARE TECHN increased its bottom line by earning $3.43 versus $3.28 in the prior year. This year, the market expects an improvement in earnings ($4.02 versus $3.43).