Software-as-a-service (SaaS) stocks are having a terrible time in the market thanks to concerns that their days of rapid growth may be over as the world returns to normalcy following the pandemic. This has weighed heavily on high-flying SaaS stocks like Twilio (TWLO 0.22%) that crushed the market last year but have failed to replicate their magic in 2021.

Twilio's share price has fallen sharply in the past month despite a terrific start to the new fiscal year and a solid outlook that indicates high levels of growth even as the world starts returning to normalcy. Rival communications-platform-as-a-service (CPaaS) provider Bandwidth (BAND -0.38%) has also suffered, losing nearly a quarter of its market capitalization in 2021.

TWLO Chart

TWLO data by YCharts.

However, savvy investors looking to add a fast-growing but reasonably valued SaaS stock to their portfolio should take a closer look at Bandwidth, as it is turning out to be a better pick than its more popular peer. Here's why.

Bandwidth is delivering impressive growth

Bandwidth recently posted outstanding Q1 results. The company's total revenue soared 66% year over year to $113.5 million, driven by a 69% surge in CPaaS revenue that accounted for 88% of total sales. Non-GAAP net income shot up from $1.1 million in the year-ago quarter to $8.3 million, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped to $13.4 million from $3.1 million last year.

Bandwidth registered such impressive growth due to two factors: more customers and additional spending. The company's active CPaaS customers increased 64% year over year to nearly 3,000 during the quarter from just over 1,800 in the year-ago period. Voxbone, which Bandwidth had acquired in November of last year for $520 million, also added to the sharp increase in active customer accounts.

A green "Buy stock" button on a keyboard.

Image source: Getty Images.

Voxbone, which provides telecom application programming interface (API) solutions, had brought 700 customer accounts into Bandwidth's fold. The good news is that the acquisition has already started reaping rich rewards for the company.

Voxbone accounted for $21 million of Bandwidth's $100 million in CPaaS revenue during the quarter, which wasn't surprising. A U.K.-based insurance company is using Bandwidth's platform to send messages to more than 30 million customers worldwide. Bandwidth used Voxbone's legacy platform to source mobile numbers and integrated them with its own messaging API.

So the acquisition of Voxbone is paying off handsomely for Bandwidth and lifting its sales and earnings substantially. That's evident from the fact that Bandwidth's organic revenue growth would have been 33% year over year in Q1. Additionally, Bandwidth points out that Voxbone sports a superior margin profile. Mordor Intelligence estimates that the telecom API market could grow at an annual rate of over 17% through 2026, indicating that Voxbone can keep delivering strong growth for Bandwidth in the long run.

Additionally, Bandwidth customers have been spending more money on its offerings. That's evident from the dollar-based net retention rate of 125% during the quarter. This means Bandwidth's active customers increased their spending by 25% year over year. What's more, it is worth noting that the metric wasn't impacted by the Voxbone acquisition, indicating that Bandwidth recorded strong organic growth in customer spending.

Investors shouldn't miss this opportunity

Bandwidth expects Q2 revenue of $116.5 million at the midpoint of its guidance range, which would represent an increase of 51% over the year-ago period. The full-year revenue guidance of $474.6 million implies 38% revenue growth over last year. However, Bandwidth can do better and drive additional customer spending thanks to the Voxbone acquisition and the strong organic growth that it is witnessing.

For comparison, Twilio had reported 62% revenue growth last quarter and expects a 50% increase in the top line this quarter. However, Twilio is three times as expensive as Bandwidth. Twilio's price-to-sales (P/S) ratio is 23 versus Bandwidth's multiple of 7.3. This makes Bandwidth an ideal SaaS pick for investors who are looking to add a relatively inexpensive growth stock to their portfolio.