NEW YORK (CNN/Money) – There's a palpable sense of excitement among investors in software stocks. The reason: The sector seems on the verge of a major wave of consolidation.

PeopleSoft finally agreed to sell out to Oracle. And there's speculation that anti-virus software developer Symantec is looking to buy storage software firm Veritas.

But the most promising software stocks might be those that haven't popped up on the merger merry go-round. Graphic software developers Adobe (Research) and Autodesk (Research) are two.

They are among the best performing tech stocks in the S&P 500 this year. Shares of Adobe, maker of the popular Acrobat document creation software and Photoshop digital imaging tool, are up more than 60 percent.

Shares of Autodesk, which sells animation and image rendering software used primarily by architects and engineers, have surged 180 percent.

And analysts are bullish about 2005 as well.

That's because the two companies have been able to thrive in what has been a challenging year for software firms. Even though the economy is picking up, corporations have been reluctant to plunk down large sums of money for new software.

Adobe and Autodesk have been able to buck the trend for a few reasons.

For one, the companies' software tends to be less expensive than large-scale enterprise applications sold by the likes of SAP and Oracle. As such, purchase decisions don't get held up in layers of management, said Barbara Coffey, an analyst with Brean Murray.

"By all means there's a lower price point, so there is less internal nonsense," she said.

Great graphics! Adobe and Autodesk have outperformed the S&P 500 thanks to strong demand for their design software.

What's more, graphic design work is increasingly being done on computers. "Adobe and Autodesk are helping corporations have more fully digital work flows. That's a basic trend and they are benefiting the most," said Coffey.

(For a similar reason, Coffey said she also likes smaller graphic software firm Macromedia (Research), which makes the popular Flash software tool.)

Finally, Coffey said that businesses are still in the early stages of moving content online, so there are still growth opportunities.

Mark Schappel, an analyst with Keybanc Capital Markets, agrees, adding that a strengthening economy should help companies like Adobe and Autodesk even more than other software developers.

In the case of Adobe, a pick-up in advertising spending is good news, he said, since many graphics designers in the ad industry use Adobe products. And for Autodesk, record high levels of construction spending should be a boon as it could lead to increased demand for Autodesk's software from architects and engineers.

Analysts have been consistently raising their profit targets for both companies. The consensus fiscal 2005 earnings estimate for Adobe has increased by nearly 4 percent in the past three months while Autdoesk's 2005 forecast is almost 15 percent higher than it was three months ago.

"You have to own software companies with strong fundamental trends behind them. There are a limited number of those and Autodesk and Adobe fit that bill," said Robert Mattson, an analyst with Gartmore Global Investments, an asset management firm that owns both stocks in some of its mutual funds.

But what about valuations? Are the stocks now overpriced given how much they have run up this year?

Both stocks trade at about 32 times 2005 earnings estimates, certainly not a cheap multiple. But both companies are expected to post average earnings gains of about 15 percent a year for the next few years.

And both companies have a recent history of beating consensus forecasts. Since analyst have had to keep raising their estimates, Mattson argues that the stocks aren't as expensive as they seem.

"Analysts have all gotten the forward estimates completely wrong so what really are the right numbers?" Mattson said.

Of course, this raises another risk. Traders have fallen in love with the two stocks because they keep beating estimates.

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Schappel said that because of their rich valuations, the pressure is going to be on Adobe and Autodesk to keep posting strong numbers. He thinks the companies are likely to do so but long-term investors need to realize that the stocks could be extremely volatile performers in the next few months.

"Fundamentals are sound for both businesses and they are in strong product cycles," said Schappel. "But they are momentum stocks, so if they just meet estimates they are in trouble."

With that in mind, Adobe will face a test on Thursday afternoon when it reports its fiscal fourth quarter results. Analysts expect earnings to increase by 24 percent to 42 cents a share and for sales to increase 17 percent to about $419 million. Autodesk reports its next quarterly figures in February.

Analysts quoted in this story do not own shares of the companies mentioned and their firms have no investment banking ties with the companies.

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