Over the years, the dynamics of the software industry, the way organizations conduct their businesses and people connect with each other have changed, thanks to technological progress and innovations.

Think of the software industry and the first name that crops up is Microsoft Corporation (MSFT Quick QuoteMSFT - Free Report) . Its operating systems are installed on the majority of computers globally. It is also one of the leading providers of cloud infrastructure and services.

With its sustained focus on innovation, the world’s largest software company now has a market capitalization of over $483 billion.

Microsoft has also been consistently surpassing the Zacks Consensus Estimate. The company beat the Zacks Consensus Estimate in eight of the trailing nine quarters with an average positive earnings surprise of 12.2%. In the last reported quarter, the company’s top line and bottom lines surpassed the respective estimates.

Notably, shares of Microsoft have outperformed the Zacks Categorized Computer Software-Services industry since its last quarterly results reported on Oct 20. While the stock has returned 8.6%, the industry generated a negative return of 0.1%.

The stock’s favorable run is primarily backed by strong growth in cloud. Going ahead, the company’s top line is expected to benefit from consistent enterprise strength and solid growth prospects of the Office 365 subscription model, Azure and its new products

We opine that the company’s target of touching $20 billion in annualized commercial cloud revenue runrate by 2018 looks achievable owing to the aforementioned growth drivers.

We believe that though Microsoft has huge growth potential, there are other players in the software industry which may pose stiff competition.

5 Software Stocks with Solid Potential

With the help of our style score system, we have identified five software stocks with excellent growth potential and a favorable Zacks Rank.

Our Growth Style Score condenses all the essential metrics from the company’s financial statements to achieve a true sense of quality and sustainability of its growth. Our research shows that stocks with Growth Style Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best investment opportunities in the growth investing space.

Apart from this, all the stocks listed below have delivered positive average earnings surprises over the last four quarters.

Manhattan Associates, Inc. (MANH Quick QuoteMANH - Free Report)

Manhattan Associates is a leading provider of technology-based solutions to improve supply chain effectiveness and efficiencies. The company's solutions enhance distribution efficiencies through the integration of supply chain constituents, including manufacturers, distributors, retailers, suppliers, transportation providers and end consumers.

With a Growth Style Score of “A” and a Zacks Rank #2, Manhattan Associates has posted positive earnings surprises in the four trailing quarters, with an average beat of 10.1%. Moreover, the stock has a long-term earnings per share (EPS) growth rate of 15%.

Proofpoint, Inc.

Proofpoint is a leading security-as-a-service provider that focuses on cloud-based solutions for threat protection, compliance, archiving & governance, and secure communications.

This company has posted positive earnings surprises in the four trailing quarters, with an average surprise of 21.0%. It also has a Growth Style Score of “A.” Apart from this, Proofpoint has a long-term EPS growth rate of 25.8% and carries a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here.

Rosetta Stone Inc.

Rosetta Stone is a leading provider of technology-based language learning solutions consisting of software, online services and audio practice tools, primarily under the Rosetta Stone brand.

Not only does this stock carry a Zacks Rank #2, it also has an attractive Growth Style Score of “A.” Also, the company has a trailing four-quarter positive average earnings surprise of a whopping 59.2%. Additionally, the stock has a long-term EPS growth rate of 10%.

Aspen Technology Inc. (AZPN Quick QuoteAZPN - Free Report)

Aspen Technology is a recognized expert and leading provider of award-winning process optimization software and services. AspenTech's integrated aspenONE solutions enable manufacturers to reduce costs, increase capacity, and optimize operational performance end-to-end across engineering, plant operations, and supply chain management processes. This in turn leads to millions of dollars in cost savings.

This company has posted positive earnings surprises in the four trailing quarters, with an average surprise of 23.6%. The Zacks Rank #2 stock also has a Growth Style Score of “B.” Apart from this, Aspen Technology has a long-term EPS growth rate of 13.0%.

ServiceSource International, Inc.

ServiceSource provides a suite of cloud applications for service revenue management. The company provides end-to-end management and optimization of the service contract renewals process, including data management, quoting, selling and service revenue business intelligence.

With a Growth Style Score of “A” and a Zacks Rank #2, ServiceSource has posted positive earnings surprises in the four trailing quarters, with an average beat of 58.3%.

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