Investors flock to the technology sector because of its constituents’ innovation and high-growth potential. Artificial intelligence (AI) technologies, for example, brought excitement to the market. AI-related stocks rose in value, and the uptrend will likely continue.
However, if you’re investing in the sector for the long haul, two niche players in the software application industry are smart buys. Their share prices won’t hurt your wallets. Moreover, a $1,500 investment today in one or both can grow 10-fold in the coming years.
Dominant market presence
Computer Modelling Group (TSX:CMG) operates in the oil and gas industry, catering to energy majors or the world’s largest oil companies. The $851.5 million software and consulting company provides reservoir simulation software that helps solve industry operators’ complex subsurface and surface challenges.
Bluware-Headwave Ventures, a strategic acquisition in 2023, specializes in cloud and interactive deep-learning solutions for subsurface decision-making, including seismic interpretation. CMG acquired Sharp Reflections GmbH, a cloud-based seismic processing and interpretation platform, in 2024. Both are growth drivers.
In November 2024, CMG partnered with AI king NVIDIA. According to its chief executive officer (CEO), Pramod Jain, it marked a significant step forward for CMG to evolve its solutions through advances in high-performance computing, AI, and machine learning.
Jain believes that CMG has significant potential for long-term growth because of new customer growth and strong margins. Management’s priority is free cash flow (FCF) conversion, enabling flexibility for the company’s acquisition strategy. Also, refining the acquisition process is an ongoing concern.
In the first half of fiscal 2025 (six months ended September 30, 2024), total revenues climbed 38.3% year over year to $59.99 million. Net income fell 42.4% to $7.72 million from a year ago due mainly to higher operating expenses. FCF for the period reached $6 million.
CMG is 40 years old in the business and has established a dominant market presence. Management said the CMG 4.0 strategy aims to transform the company into a market-led firm driven by sustained organic growth in the reservoir simulation business. If you invest today, the tech stock trades at $10.39 per share and pays a 1.69% dividend.
Safety leader
Blackline Safety (TSX:BLN) designs, develops and manufactures employee safety monitoring technology. Besides lone worker protection, the $559.4 million company specializes in gas detection. As of this writing, the share price is $6.85. The total return in 2024 was a market-beating 92.4%.
This global connected safety leader relies on the disruptive Hardware-enabled Software-as-a-Service (HeSaaS) business model to drive growth. In the third quarter (Q3) of 2024, total revenue increased 36% to $33.7 million versus Q3 2024, the 30th consecutive quarter of year-over-year top-line growth. The net loss improved 64% to $2.5 million, while earnings before interest, taxes, depreciation, and amortization (EBITDA) was positive $53,000.
Cody Slater, Blackline’s chairman and CEO, said, “Top-line growth has been the story all along for Blackline, but achieving positive EBITDA demonstrates that the company is now truly reaching scale, and we have barely scratched the surface of what we can accomplish.”
Long growth runways
The future is exciting and bright for Computer Modelling and Blackline Safety. Their respective businesses are essential and critical and have long growth runways.
