ClickSoftware Technologies Ltd. (CKSW), Qlik Technologies Inc (QLIK), Tangoe Inc (TNGO): Software Acquisition Targets to Buy

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Enterprise resource management

Tangoe Inc (NASDAQ:TNGO) provides an intriguing valuation trading significantly below 52-week highs from back around $22 last summer. The communications lifecycle management software provider reported 31% revenue growth during Q1 2013 and continues to expect strong revenue growth for 2013.

More importantly, the company generated $5.6 million of unlevered free cash flow for the quarter. As with most stocks on the list, it has a cash balance of $43.6 million providing an enterprise value of roughly $500 million. With a revenue run rate exceeding $225 million in 2014, the stock trades at under 2.5 times revenue expectations. At only 17 times forward earnings, the stock trades significantly below the long-term expectations of 25% earnings growth.

Bottom line

While investors can continue gambling with the high priced stocks such as Cornerstone OnDemand, Palo Alto Networks, and Demandware, the best way to play a potential buyout is with stocks that offer good value. Especially ones where a new management team or a larger firm could help kick start growth via customer connections. In this manner, ClickSoftware Technologies Ltd. (NASDAQ:CKSW) offers a compelling valuation and turnaround story while both Qlik Technologies Inc (NASDAQ:QLIK) and Tangoe Inc (NASDAQ:TNGO) offer growth opportunities at a reasonable value. Its highly possible that none of these stocks will be bought out, but buying them at attractive valuations will still provide investors with solid returns with the potential for homerun gains if an offer is extended.

The article Software Acquisition Targets to Buy originally appeared on Fool.com and is written by Mark Holder.

Mark Holder and Stone Fox Capital Advisors, LLC have no positions in any stocks mentioned. The Motley Fool recommends Click Software Technologies and Qlik Technologies. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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