3 software stocks you need to have on your watchlist

These 3 small Australasian companies have plenty of potential – even on a global stage

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There are plenty of up-and-coming tech stocks listed on the ASX – several many investors are unaware of. But their small market caps and exclusion from major indices such as the S&P/ASX 200 (IndexASX: XJO) (ASX: XJO) mean not many analysts cover them – both an opportunity for smaller investors – and a disadvantage in that it can be difficult to discover these smallish companies.

Here's 3 I've got my eye on.

Vista Group International Ltd (ASX: VGI) dominates a global niche industry – despite hailing from across the ditch (New Zealand). The company sells software that cover all aspects of the cinema, from ticketing sales, food and beverage, digital signage, cash management, staff scheduling and projection.

The company controls around 37% of the global cinema software industry and is the only non-Chinese cinema software provider authorised in China. Cinema screenings in China are growing at a massive 34%.

With a market cap of around $416 million and an expect annual profit of around $8 million, Vista isn't cheap (P/E ratio above 32x), but it appears to be a high-quality company with exceptional growth prospects.

Urbanise.com Ltd (ASX: UBN) provides software to deliver services to buildings. The company's could-based platform gives facilities managers access to a consolidated reporting, monitoring and management platform, saving companies energy and staff costs. As many software-as-a-service (SAAS) products are these days, urbanise charges customers regular monthly subscription fees.

Revenues in the last half grew by 94% to $3.3 million, and the company expects strong growth again in the second half, forecasting revenues of around $9.75 million for the full year.

With a market cap of $277 million and not yet profitable, shares definitely don't appear cheap. But then you are paying for strong growth in revenues. If that continues, today's price could look ridiculously cheap.

Corum Group Limited (ASX: COO) offers software for pharmacies, such as point of sale (POS) and pharmaceutical dispensing software, and reportedly has over 40% of the pharmacy market share. The company also offers software that allows credit card payments over the internet, such as council rates and rental payments. That may sound basic, but it can be difficult and expensive to implement.

Corum has a market cap of $43.6m, and is currently trading on a prospective P/E ratio of 7x and paid out a fully franked 6.9% dividend last financial year. Additionally, the company has more than $12 million cash in the bank and no debt.

Of the 3 above, Corum appears the cheapest – but also appears to have the lowest prospects for massive growth. Foolish investors might want to add all three to their watchlists.

Motley Fool contributor Mike King has no position in any stocks mentioned. You can follow Mike on Twitter @TMFKinga The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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