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 Thursday, December 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.

Aware Inc’s Value Grade

Value Grade:

Aware, Inc. is an authentication company that is focused on validating and securing identities using adaptive biometrics. The Company enables government agencies and commercial entities to enroll, identify, authenticate and enable using biometrics, which comprises physiological characteristics, such as fingerprints, faces, irises and voices. Its portfolio of biometric solutions and robust products designed explicitly for ease of integration, including customer-managed and integration ready biometric frameworks, platforms, software development kits (SDKs) and services. Its principal government applications of biometrics systems include border control, visa applicant screening, law enforcement, national defense, intelligence, secure credentialing, access control and background checks. Its commercial applications include mobile enrollment, user authentication, identity proofing, and secure transaction enablement. Its SDKs consist of multiple software libraries and sample applications.

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.

Aware Inc has a Value Score of 74, which is considered to be undervalued.

When you look at Aware Inc’s price-to-sales ratio at 1.91 compared to the industry median at 3.55, this company has a lower price relative to revenue compared to its peers. This could make Aware Inc’s stock more attractive for value investors.

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. Aware Inc’s shareholder yield is higher than its industry median ratio of (2.58%). 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. Aware Inc’s price-to-book ratio is lower than its industry median ratio of 3.34. This could make Aware Inc more attractive to investors looking for a new addition to their portfolio.

Bridgeline Digital Inc’s Value Grade

Value Grade:

Bridgeline Digital, Inc. is a marketing technology software company. Its Unbound platform is a digital platform that integrates Web content management, e-commerce, e-marketing, digital marketing, and Web analytics. It offers enterprise site search solutions with its Celebros Search and HawkSearch products. The Celebros Search is a commerce-oriented site search product that provides for natural language processing and incorporates artificial intelligence to present relevant search results based on long-tail keyword searches. HawkSearch is a site search, recommendation, and personalization application built for marketers, merchandisers, and developers to enhance online customer's content search. Its Woorank is a search engine optimization (SEO) audit tool that generates an instant performance audit of the site?s technical, on-page, and off-page SEO. Its TruPresence is a Web content management and e-commerce platform to support the needs of multi-unit organizations and franchises.

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.

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

Bridgeline Digital Inc’s price-to-book ratio is higher than its peers. This could make Bridgeline Digital Inc less attractive for value investors when compared to the industry median at 3.34.

You can read more about Bridgeline Digital 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.

Viant Technology Inc’s Value Grade

Value Grade:

Viant Technology Inc. is an advertising technology company. The Company enables marketers to plan, execute and measure omnichannel advertising (ad) campaigns through a cloud-based platform. Its cloud-based demand side platform (DSP), Adelphic, is an easy-to-use self-service platform that provides its customers with transparency and control over their advertising campaigns. Through its omni-channel platform, a marketer can easily buy ads on desktop, mobile, connected television (TV), linear TV, in-game, streaming audio and digital billboards. Its platform delivers a full suite of forecasting, reporting and built-in automation that provides its customers with insights into available inventory based on the desired target audience. platform supports a full range of transaction types including real-time bidding, private marketplace and programmatic guaranteed, allowing customers to easily source and integrate ad inventory directly from publishers and private marketplaces.

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.

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

Viant Technology Inc’s price-to-book ratio is higher than its peers. This could make Viant Technology Inc less attractive for value investors when compared to the industry median at 3.34.

You can read more about Viant Technology 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.

Ebix Inc’s Value Grade

Value Grade:

Ebix, Inc. is a provider of on-demand infrastructure software exchanges and e-commerce services to the insurance, financial, travel, cash remittance and healthcare industries. In the insurance sector, the Company?s main focus is to develop and deploy globally a variety of insurance and reinsurance exchanges on an on-demand basis using software-as-a-service (SaaS) enterprise solutions in the areas of customer relationship management (CRM), front-end and back-end systems, and outsourced administrative and risk compliance. The Company?s EbixCash Financial exchange portfolio of software and services consists of domestic and international money remittance, foreign exchange (Forex), travel, pre-paid gift cards, utility payments, and lending and wealth management in India and other primarily Southeast Asian markets. It operates India's airport Forex business, with operations in approximately 20 international airports, including Delhi, Mumbai, Hyderabad, Chennai and Kolkata.

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.

Ebix Inc has a Value Score of 98, which is considered to be undervalued.

Ebix Inc’s price-earnings ratio is 11.7 compared to the industry median at 48.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Ebix Inc more attractive for value investors.

Ebix Inc’s price-to-book ratio is higher than its peers. This could make Ebix Inc less attractive for value investors when compared to the industry median at 3.34.

You can read more about Ebix 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.

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 89, 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 3.34.

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:

FiscalNote Holdings, Inc. is a technology provider of global policy and market intelligence. By combining artificial intelligence (AI) technology, actionable data, and expert and peer insights, the Company enables customers to manage policy, address regulatory developments, and mitigate global risk. Its products and services include policy monitoring, news and analysis, stakeholder management, advocacy, global risk, community insights, constituent services, and ESG solutions. Its solutions by role include global government relations, federal government relations, state and local government relations, grassroots advocacy, government agencies, congressional offices, public and external affairs, and legal and compliance executives. Its solutions by industry and issue include cannabis, cryptocurrency, cybersecurity, data privacy, education, and energy and environment, among others. It offers various brands, including Home to CQ, FrontierView, Oxford Analytica, and VoterVoice, among others.

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 65, 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 3.34.

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.

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.

• Aware Inc stock has a Value Grade of B.
• Bridgeline Digital Inc stock has a Value Grade of A.
• Viant Technology Inc stock has a Value Grade of B.
• Ebix Inc stock has a Value Grade of A.
• Marin Software Inc stock has a Value Grade of A.
• FiscalNote Holdings 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 Thursday, December 21
• What You Need to Know About A10 Networks Inc's Q3 Earnings
• What You Need to Know About Agilysys, Inc.'s Q2 Earnings
• What You Need to Know About Alarm.com Holdings Inc's Q3 Earnings

AAII Disclaimer

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