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 Tuesday, February 20, 2024. 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.

CareCloud Inc’s Value Grade

Value Grade:

CareCloud, Inc. is a healthcare information technology company. The Company provides a suite of cloud-based solutions and related business services, to healthcare providers, from small practices to enterprise medical groups, hospitals, and health systems throughout the United States. Its segments include Healthcare IT and Medical Practice Management. Healthcare IT segment includes revenue cycle management and other services. Medical Practice Management segment includes the management of three medical practices. Its technology-enabled business solutions include revenue cycle management; Cloud-based software; Digital health; and Healthcare IT professional services & staffing. Its software-as-a-service platforms include practice management (PM), electronic health record (EHR), business intelligence, telehealth, patient experience management (PXM), and others. Its Revenue Cycle Management services including end-to-end medical billing, eligibility, analytics, and related services.

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.

CareCloud Inc has a Value Score of 97, which is considered to be undervalued.

When you look at CareCloud Inc’s price-to-sales ratio at 0.18 compared to the industry median at 3.62, this company has a lower price relative to revenue compared to its peers. This could make CareCloud Inc’s stock more attractive for value investors.

Now, let’s assess CareCloud Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 2.0, when compared to the industry median of 24.3, 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. CareCloud 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. CareCloud Inc’s price-to-book ratio is lower than its industry median ratio of 3.54. This could make CareCloud Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at CareCloud Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. CareCloud Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 35.41. This could make CareCloud Inc more attractive because the lower P/FCF ratio indicates that CareCloud Inc is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Consensus Cloud Solutions Inc’s Value Grade

Value Grade:

Consensus Cloud Solutions, Inc. is a provider of secure information delivery services with a scalable Software-as-a-Service platform. Its communication and digital signature solutions enable its customers to securely and cooperatively access, exchange and use information across organizational, regional and national boundaries. Its products and solutions include eFax Corporate, Unite, jSign, Conductor, Clarity and eFax. eFax Corporate provides digital cloud fax technology. Unite is a single platform that allows the user to choose between several protocols to send and receive healthcare information in an environment. jSign provides electronic signature and digital signature solutions to businesses. Clarity is engaged in using natural language processing and artificial intelligence information. eFax is an online faxing service for customers. In addition to eFax, it offers a variety of brands for subscription. Conductor is a robust interface engine and complete interoperability 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.

Consensus Cloud Solutions Inc has a Value Score of 90, which is considered to be undervalued.

Consensus Cloud Solutions Inc’s price-earnings ratio is 5.0 compared to the industry median at 48.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Consensus Cloud Solutions Inc more attractive for value investors.

You can read more about Consensus Cloud 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.

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 99, which is considered to be undervalued.

Ebix Inc’s price-earnings ratio is 8.0 compared to the industry median at 48.6. 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 3.54.

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.

Sharecare Inc’s Value Grade

Value Grade:

Sharecare, Inc. (Sharecare) is a digital health company that helps people manage their health in one place. The Company?s platform is a health and well-being digital hub that unifies elements of individual and community health into one experience. Its platform includes a single mobile application available on the iPhone Operating System (iOS), Android and the Web, as well as a suite of infrastructure and business services hosted in the Amazon Web Services (AWS), cloud. Its data-driven virtual health platform is designed to help people, patients, providers, employers, health plans, government organizations and communities. The platform provides a single destination for people, patients and caregivers to access and clinically reviewed content; digitally connect with other patients, community members and healthcare professionals, and adopt action plans provided by healthcare professionals from institutions.

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.

Sharecare Inc has a Value Score of 71, which is considered to be undervalued.

Sharecare Inc’s price-to-book ratio is higher than its peers. This could make Sharecare Inc less attractive for value investors when compared to the industry median at 3.54.

You can read more about Sharecare 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.

Science 37 Holdings Inc’s Value Grade

Value Grade:

Science 37 Holdings, Inc. is engaged in patient-centric clinical trials and in supporting novel approaches to decentralized clinical trial designs. Through its patient-centric approach, it reduces the impact of the geographic barriers associated with conventional physical clinical trial sites, enabling recruitment of virtually any patient. Its offerings lie in its configurable unified technology platform combined with its centralized patient recruitment capabilities and specialized network of patient communities. Its unified technology platform is purpose-built for patient-centric clinical trial execution and is designed to provide an end-to-end, single stop solution. It also provides specialized networks of patient communities, telemedicine investigators, mobile nurses, and remote coordinators designed for the purpose of orchestrating patient-centric clinical trials. It uses diversified, multi-channel programs to identify patients who fit the profile for each of its projects.

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.

Science 37 Holdings Inc has a Value Score of 91, which is considered to be undervalued.

Science 37 Holdings Inc’s price-to-book ratio is higher than its peers. This could make Science 37 Holdings Inc less attractive for value investors when compared to the industry median at 3.54.

You can read more about Science 37 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.

VerifyMe Inc’s Value Grade

Value Grade:

VerifyMe, Inc. is a software-driven logistics provider of end-to-end logistics management solutions. The Company operates through two segments: PeriShip Global Solutions and VerifyMe Solutions. The PeriShip Global Solutions segment provides a value-added service for time and temperature-sensitive parcel management driven by a software platform that provides predictive analytics from metrics, such as flight-tracking, weather, and traffic, all delivered to customers via a secure portal. The VerifyMe Solutions segment provides unit level traceability, brand protection, unit level traceability and consumer engagement solutions, allowing brand owners to gather business intelligence, cross-sell products, monitor product diversion through the supply chain and build brand loyalty. It provides real-time information and analysis to mitigate supply chain flow interruption, delivering last-mile resolution for key markets, including the perishable healthcare and food industries.

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.

VerifyMe Inc has a Value Score of 61, which is considered to be undervalued.

VerifyMe Inc’s price-to-book ratio is higher than its peers. This could make VerifyMe Inc less attractive for value investors when compared to the industry median at 3.54.

You can read more about VerifyMe 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.

• CareCloud Inc stock has a Value Grade of A.
• Consensus Cloud Solutions Inc stock has a Value Grade of A.
• Ebix Inc stock has a Value Grade of A.
• Sharecare Inc stock has a Value Grade of B.
• Science 37 Holdings Inc stock has a Value Grade of A.
• VerifyMe 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 Tuesday, February 20
• 6 Undervalued Software Stocks for Monday, February 19
• Which Is a Better Investment, Alarm.com Holdings Inc or Cellebrite DI Ltd Stock?
• Which Is a Better Investment, Alteryx Inc or Cellebrite DI Ltd Stock?

AAII Disclaimer

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