Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 5 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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5 Undervalued Software Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 5 undervalued stocks in the Software industry for Tuesday, November 21, 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.

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.

When you look at Marin Software Inc’s price-to-sales ratio at 0.29 compared to the industry median at 3.48, this company has a lower price relative to revenue compared to its peers. This could make Marin Software Inc’s stock more attractive for value investors.

Now, let’s assess Marin Software Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 0.3, 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. Marin Software Inc’s shareholder yield is lower than its industry median ratio of (2.55%). 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. Marin Software Inc’s price-to-book ratio is lower than its industry median ratio of 3.09. This could make Marin Software Inc more attractive to investors looking for a new addition to their portfolio.

Powerbridge Technologies Co Ltd’s Value Grade

Value Grade:

Powerbridge Technologies Co., Ltd. is a China-based company which mainly provides software application and technology solutions and services to corporate and government customers. The Company designs and develops cloud-based Powerbridge BaaS Services (blockchain-as-a-service) that is intended for all players in the global trade ecosystem. The Company’s technology platforms include Powerbridge System Platform and Powerbridge SaaS 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.

Powerbridge Technologies Co Ltd has a Value Score of 70, which is considered to be undervalued.

Powerbridge Technologies Co Ltd’s price-to-book ratio is higher than its peers. This could make Powerbridge Technologies Co Ltd less attractive for value investors when compared to the industry median at 3.09.

You can read more about Powerbridge Technologies Co Ltd’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.

Scienjoy Holding Corp’s Value Grade

Value Grade:

Scienjoy Holding Corp, formerly Wealthbridge Acquisition Ltd, is a Hong Kong-based company mainly engages in the provision of show live streaming video entertainment social platform. The Company mainly operates online live streaming websites and mobile applications under the brand name of Showself, Lehai, and Haixiu.

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.

Scienjoy Holding Corp has a Value Score of 65, which is considered to be undervalued.

Scienjoy Holding Corp’s price-earnings ratio is 6.0 compared to the industry median at 45.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Scienjoy Holding Corp more attractive for value investors.

Scienjoy Holding Corp’s price-to-book ratio is higher than its peers. This could make Scienjoy Holding Corp less attractive for value investors when compared to the industry median at 3.09.

You can read more about Scienjoy Holding Corp’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.

Supercom Ltd’s Value Grade

Value Grade:

Supercom Ltd is an Israel-based global provider of traditional and digital identity solutions, advanced Internet of Things (IoT) and connectivity solutions, and cyber security products and solutions, to governments and private and public organizations throughout the world. The Company is comprised of three main Strategic Business Units (SBU): e-Gov, IoT and Connectivity (IoT), and Cyber Security: e-Gov, e-Government platforms and innovative solutions for traditional and biometrics enrollment, personalization, issuance and border control services; IoT and Connectivity - products and solutions that identify, track and monitor people or objects in real time, enabling its customers to detect unauthorized movement of people, vehicles and other monitored objects and Cyber Security delivered through subsidiaries such as, Safend Ltd and Prevision Ltd.

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.

Supercom Ltd has a Value Score of 73, which is considered to be undervalued.

Supercom Ltd’s price-to-book ratio is higher than its peers. This could make Supercom Ltd less attractive for value investors when compared to the industry median at 3.09.

You can read more about Supercom Ltd’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.

Zedge Inc’s Value Grade

Value Grade:

Zedge, Inc. is engaged in building digital marketplaces and competitive games. The Company's products include Zedge Ringtones and Wallpapers, which is a freemium digital content marketplace offering mobile phone wallpapers, video wallpapers, ringtones and notification sounds; pAInt, a generative artificial intelligence (AI) wallpaper maker; GuruShots, a skill-based photo challenge game, and Emojipedia. It uses open-source software in connection with its services. The Zedge Ringtones and Wallpapers app is available both in Google Play and the App Store. Its GuruShots product offers a platform spanning iOS, Android, and the Web that provides an educational and structured way for amateur photographers to compete in a variety of contests. It has added non-fungible token (NFT) functionality to a limited number of Zedge Premium creators via NFTs Made Easy, and all NFT Made Easy transactions are made using Zedge Credits. The Company serves over 40 million active users across its offerings.

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.

Zedge Inc has a Value Score of 87, which is considered to be undervalued.

Zedge Inc’s price-to-book ratio is higher than its peers. This could make Zedge Inc less attractive for value investors when compared to the industry median at 3.09.

You can read more about Zedge 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 5 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.

• Marin Software Inc stock has a Value Grade of A.
• Powerbridge Technologies Co Ltd stock has a Value Grade of B.
• Scienjoy Holding Corp stock has a Value Grade of B.
• Supercom Ltd stock has a Value Grade of B.
• Zedge Inc stock has a Value Grade of A.

Now that you have a bit more background about each of the 5 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.

• 5 Undervalued Software Stocks for Tuesday, November 21
• 6 Undervalued Software Stocks for Monday, November 20
• Why C3.ai Inc’s (AI) Stock Is Down 4.33%
• Why Cerence Inc’s (CRNC) Stock Is Up 4.96%

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.