3 Stocks Raising The Computer Software & Services Industry Higher

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

All three major indices traded up today with the Dow Jones Industrial Average ( ^DJI) trading up 209 points (1.2%) at 17,010 as of Friday, Oct. 3, 2014, 4:20 PM ET. The NYSE advances/declines ratio sits at 2,086 issues advancing vs. 991 declining with 139 unchanged.

The Computer Software & Services industry as a whole closed the day up 1.2% versus the S&P 500, which was up 1.1%. Top gainers within the Computer Software & Services industry included Authentidate ( ADAT), up 4.6%, Sonic Foundry ( SOFO), up 2.9%, FalconStor Software ( FALC), up 2.6%, GlobalSCAPE ( GSB), up 1.6% and MGT Capital Investments ( MGT), up 2.2%.

TheStreet Ratings Group would like to highlight 3 stocks pushing the industry higher today:

FalconStor Software ( FALC) is one of the companies that pushed the Computer Software & Services industry higher today. FalconStor Software was up $0.03 (2.6%) to $1.19 on light volume. Throughout the day, 37,419 shares of FalconStor Software exchanged hands as compared to its average daily volume of 54,600 shares. The stock ranged in a price between $1.16-$1.20 after having opened the day at $1.16 as compared to the previous trading day's close of $1.16.

FalconStor Software, Inc. develops, manufactures, and sells data migration, business continuity, disaster recovery, optimized backup, and de-duplication solutions worldwide. FalconStor Software has a market cap of $53.8 million and is part of the services sector. Shares are down 14.1% year-to-date as of the close of trading on Thursday. Currently there are no analysts who rate FalconStor Software a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates FalconStor Software as a sell. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on FALC go as follows:

  • FALC has underperformed the S&P 500 Index, declining 20.00% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • 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, FALCONSTOR SOFTWARE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The revenue fell significantly faster than the industry average of 11.5%. Since the same quarter one year prior, revenues fell by 19.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for FALCONSTOR SOFTWARE INC is currently very high, coming in at 81.36%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 11.77% trails the industry average.
  • Net operating cash flow has significantly increased by 121.80% to $1.10 million when compared to the same quarter last year. In addition, FALCONSTOR SOFTWARE INC has also vastly surpassed the industry average cash flow growth rate of 42.78%.

You can view the full analysis from the report here: FalconStor Software Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

At the close, Sonic Foundry ( SOFO) was up $0.26 (2.9%) to $9.38 on light volume. Throughout the day, 1,454 shares of Sonic Foundry exchanged hands as compared to its average daily volume of 6,600 shares. The stock ranged in a price between $9.12-$9.38 after having opened the day at $9.12 as compared to the previous trading day's close of $9.12.

Sonic Foundry, Inc. provides enterprise solutions and services for the Web communications market in the United States, Europe, the Middle East, Asia, and internationally. Sonic Foundry has a market cap of $40.2 million and is part of the services sector. Shares are down 6.2% year-to-date as of the close of trading on Thursday. Currently there is 1 analyst who rates Sonic Foundry a buy, no analysts rate it a sell, and none rate it a hold.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates Sonic Foundry as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in stock price during the past year and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from TheStreet Ratings analysis on SOFO go as follows:

  • The revenue growth came in higher than the industry average of 11.5%. Since the same quarter one year prior, revenues rose by 40.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • Despite currently having a low debt-to-equity ratio of 0.42, 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 0.88 is weak.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Software industry and the overall market, SONIC FOUNDRY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$0.10 million or 166.66% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

You can view the full analysis from the report here: Sonic Foundry Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Authentidate ( ADAT) was another company that pushed the Computer Software & Services industry higher today. Authentidate was up $0.03 (4.6%) to $0.68 on average volume. Throughout the day, 128,219 shares of Authentidate exchanged hands as compared to its average daily volume of 90,400 shares. The stock ranged in a price between $0.63-$0.68 after having opened the day at $0.65 as compared to the previous trading day's close of $0.65.

Authentidate Holding Corp. provides Web-based software applications, and telehealth products and services in the United States. Authentidate has a market cap of $26.6 million and is part of the services sector. Shares are down 52.2% year-to-date as of the close of trading on Thursday. Currently there are no analysts who rate Authentidate a buy, no analysts rate it a sell, and none rate it a hold.

TheStreet Ratings rates Authentidate as a sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on ADAT go as follows:

  • Net operating cash flow has decreased to -$1.53 million or 21.62% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The gross profit margin for AUTHENTIDATE HOLDING CORP is currently lower than what is desirable, coming in at 31.56%. Regardless of ADAT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, ADAT's net profit margin of -129.59% significantly underperformed when compared to the industry average.
  • ADAT has underperformed the S&P 500 Index, declining 24.72% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • 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 Health Care Technology industry and the overall market, AUTHENTIDATE HOLDING CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • AUTHENTIDATE HOLDING CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, AUTHENTIDATE HOLDING CORP reported poor results of -$0.45 versus -$0.36 in the prior year.

You can view the full analysis from the report here: Authentidate Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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