Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 6 stocks made the list for top value stocks in the Software industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Software Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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6 Undervalued Software Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 6 undervalued stocks in the Software industry for Monday, November 20, 2023. Let’s take a closer look at their individual scores to see how they measure up against each other and the Software industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Immersion Corporation’s Value Grade

Value Grade:

Immersion Corporation is a licensing company focused on the invention, acceleration, and scaling, through licensing, of haptic technologies. The Company's primary business is focused on the mobility, gaming, and automotive markets, including entertainment, virtual and augmented reality, and wearables, as well as residential, commercial, and industrial Internet of Things. It provides technology solutions for mobile, automotive, gaming, and consumer electronics. It offers patent licenses and assistance such as reference designs, prototypes and enablement services to automotive makers and suppliers. Its licensees include ALPS Alpine, Continental, Preh, Panasonic, Mobase Electronics, Nippon Seiki, Vishay Intertechnology, Tokai Rika and Lexmark. In additional, the Company has licensed its patents to third party gaming peripheral manufacturers and distributors for use in spinning mass and force feedback devices controllers, steering wheels and joysticks, to be used with PC platforms.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Immersion Corporation has a Value Score of 63, which is considered to be undervalued.

When you look at Immersion Corporation’s price-to-sales ratio at 6.36 compared to the industry median at 3.46, this company has a higher price relative to revenue compared to its peers. This could make Immersion Corporation’s stock less attractive for value investors.

Immersion Corporation’s price-earnings ratio is 5.54 compared to the industry median at 45.07. This means it has a lower share price relative to earnings compared to its peers. This could make Immersion Corporation more attractive for value investors.

Now, let’s assess Immersion Corporation’s EV/EBITDA ratio, also known as enterprise multiple. At 9.9, when compared to the industry median of 23.9, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Immersion Corporation’s shareholder yield is higher than its industry median ratio of (2.52%). Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Immersion Corporation’s price-to-book ratio is lower than its industry median ratio of 3.11. This could make Immersion Corporation more attractive to investors looking for a new addition to their portfolio.

Marin Software Inc’s Value Grade

Value Grade:

Marin Software Incorporated provides digital marketing software for search, social and eCommerce channels. It offers unified software-as-a-service (SaaS), an advertising management platform for advertisers and agencies. The Company?s platform offers analytics, workflow and optimization solution for marketing professionals, allowing users to manage their digital advertising spend. The Company's software solution is designed to help customers to measure the effectiveness of their advertising campaigns through reporting and analytics capabilities and manage and execute campaigns through an intuitive user interface and underlying technology that streamlines and automates key functions, such as advertisement creation and bidding, across multiple publishers and channels. Its software solutions also optimize campaigns across multiple publishers and channels based on market and business data to achieve desired revenue outcomes using predictive bid management technology.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Marin Software Inc has a Value Score of 91, which is considered to be undervalued.

Marin Software Inc’s price-to-book ratio is higher than its peers. This could make Marin Software Inc less attractive for value investors when compared to the industry median at 3.11.

You can read more about Marin Software Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

FiscalNote Holdings Inc’s Value Grade

Value Grade:

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Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

FiscalNote Holdings Inc has a Value Score of 73, which is considered to be undervalued.

FiscalNote Holdings Inc’s price-to-book ratio is higher than its peers. This could make FiscalNote Holdings Inc less attractive for value investors when compared to the industry median at 3.11.

You can read more about FiscalNote Holdings Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Oppfi Inc’s Value Grade

Value Grade:

OppFi Inc. operates as a fintech platform that helps Americans gain access to credit with digital specialty finance products. The Company's platform offers accessible lending products through its proprietary technology. The OppFi platform is a mobile-optimized online application where eligible applicants, at their request, can opt into the OppFi TurnUp Program. This program helps these applicants find more affordable credit options by checking the market voluntarily. It also services customers for its SalaryTap and OppFi Card products. SalaryTap is a payroll deduction secured installment loan product. OppFi Card features a mobile experience and customer service to provide OppFi consumers with an alternative to traditional credit cards and another opportunity to build credit. Its primary products are offered by its OppLoans lending platform.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Oppfi Inc has a Value Score of 65, which is considered to be undervalued.

Oppfi Inc’s price-earnings ratio is 9.8 compared to the industry median at 45.1. This means that it has a lower price relative to its earnings compared to its peers. This makes Oppfi Inc more attractive for value investors.

Oppfi Inc’s price-to-book ratio is lower than its peers. This could make Oppfi Inc more attractive for value investors when compared to the industry median at 3.11.

You can read more about Oppfi Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Tapinator Inc’s Value Grade

Value Grade:

Tapinator, Inc. develops and publishes games for mobile platforms. The Company?s portfolio includes over 300 titles that have over 500 million mobile downloads, including games such as Video Poker Classic and Crypto Trillionaire. It publishes two types of mobile games: Category Leading Games and Rapid-Launch Games. The Company operates NFT500, a digital art collection platform consisting of blue-chip fine art non-fungible tokens (NFTs), consists of approximately 525 fine art NFTs from more than 150 prominent NFT artists, such as Tyler Hobbs, Bored Ape Yacht Club, XCOPY, Helena Sarin, Pindar Van Arman, Monica Rizzolli, Refik Anadol, Manolo Gamboa Naon, Kevin Abosch, Zach Lieberman, Pak, Anne Spalter, Snofro, Hackatao, Bruce Gilden, Justin Aversano, Claire Silver, Zancan, Matt Deslauriers, Dmitri Cherniak, Nick Kuder and Damien Hirst. The Company's Rapid-Launch Games are published primarily under its Tap2Play brand. Its subsidiaries include Tapinator, LLC and Tap2Play, LLC.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Tapinator Inc has a Value Score of 92, which is considered to be undervalued.

Tapinator Inc’s price-to-book ratio is higher than its peers. This could make Tapinator Inc less attractive for value investors when compared to the industry median at 3.11.

You can read more about Tapinator Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

VIQ Solutions Inc’s Value Grade

Value Grade:

VIQ Solutions Inc. is a Canada-based company. The Company is engaged in providing technology and services for digital evidence capture, retrieval, and content management. Its modular software allows customers to easily integrate the platform at any stage of their organization's digitization, from the capture of digital content from video and audio devices through to online collaboration, mobility, data analytics, and integration with sensors, facial recognition and speech recognition. It also provides recording and transcription services directly to a variety of clients including medical, courtrooms, legislative assemblies, hearing rooms, inquiries and quasi-judicial clients in countries like Canada, the United Kingdom, the United States and Australia. It combines artificial intelligence (AI)-driven voice and video capture technology that manages digital content in security environments including legal, criminal justice, insurance, government, corporate finance and media.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

VIQ Solutions Inc has a Value Score of 79, which is considered to be undervalued.

VIQ Solutions Inc’s price-to-book ratio is higher than its peers. This could make VIQ Solutions Inc less attractive for value investors when compared to the industry median at 3.11.

You can read more about VIQ Solutions Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Software Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Software stocks as well as other industrys.

Choosing Which of the 6 Best Software Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Immersion Corporation stock has a Value Grade of B.
• Marin Software Inc stock has a Value Grade of A.
• FiscalNote Holdings Inc stock has a Value Grade of B.
• Oppfi Inc stock has a Value Grade of B.
• Tapinator Inc stock has a Value Grade of A.
• VIQ Solutions Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 6 undervalued stocks in the Software industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Software Stocks

Want to learn more about Software stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 6 Undervalued Software Stocks for Monday, November 20
• 7 Undervalued Software Stocks for Friday, November 17
• Which Is a Better Investment, Paylocity Holding Corp or Q2 Holdings Inc Stock?
• Why American Software, Inc.’s (AMSWA) Stock Is Down 9.02%

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.