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, February 26, 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.

AGM Group Holdings Inc’s Value Grade

Value Grade:

AGM Group Holdings Inc is a technology company engaged in global technology hardware supply chain and fintech blockchain ecosystem. The Company?s products and services include: futures trading solution catering to clients using MetaTrader 5; retail-orientated online trading education website; foreign exchange (Forex) trading system that provides services to financial institutions outside of China; technology hardware research and development, manufacture, and sales. The Company operates its businesses in both the United Stated and global markets.

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.

AGM Group Holdings Inc has a Value Score of 90, which is considered to be undervalued.

When you look at AGM Group Holdings Inc’s price-to-sales ratio at 0.25 compared to the industry median at 3.56, this company has a lower price relative to revenue compared to its peers. This could make AGM Group Holdings Inc’s stock more attractive for value investors.

AGM Group Holdings Inc’s price-earnings ratio is 3.68 compared to the industry median at 48.80. This means it has a lower share price relative to earnings compared to its peers. This could make AGM Group Holdings Inc more attractive for value investors.

Now, let’s assess AGM Group Holdings Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 2.1, 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. AGM Group Holdings Inc’s shareholder yield is lower than its industry median ratio of (2.53%). 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. AGM Group Holdings Inc’s price-to-book ratio is lower than its industry median ratio of 3.41. This could make AGM Group Holdings Inc more attractive to investors looking for a new addition to their portfolio.

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.

CareCloud Inc’s price-to-book ratio is higher than its peers. This could make CareCloud Inc less attractive for value investors when compared to the industry median at 3.41.

You can read more about CareCloud 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.

HWH International Inc’s Value Grade

Value Grade:

HWH International Inc. is a lifestyle company. The Company operates through four core pillars: HWH Marketplace, Hapi Cafe, Hapi Travel Destination and Hapi Wealth Builder. The Company develops new pathways to help people in their pursuit of health, wealth, and happiness. Its HWH Marketplace offers HAPI gig platform, which is a marketing platform that provides from one-point Social Networking Service (SNS) marketing solutions to e-commerce logistics solutions. Hapi Cafe is a lifestyle cafe outlet that offers a wide range of amenities, including food and beverages, co-working areas, virtual reality (VR) fitness zone and virtual travel previews. Hapi Travel Destination allows members to book their travel, hotel and vacation packages at a significant discount. Hapi Wealth Builder is a program for individuals who are interested in learning and participating in micro-wealth building. Members will be able to access exclusive education programs at a significant discount.

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.

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

HWH International Inc’s price-earnings ratio is 16.3 compared to the industry median at 48.8. This means that it has a lower price relative to its earnings compared to its peers. This makes HWH International Inc more attractive for value investors.

HWH International Inc’s price-to-book ratio is higher than its peers. This could make HWH International Inc less attractive for value investors when compared to the industry median at 3.41.

You can read more about HWH International 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.

Ibex Ltd’s Value Grade

Value Grade:

IBEX Limited is a provider in global business process outsourcing and end-to-end customer engagement technology solutions that helps drive customer experiences (CX) for brands. The services it provides for clients are digital and traditional omni-channel capabilities. The Company has designed a differentiated suite of digital and operational solutions meant to manage interactions throughout the phases of the customer lifecycle, across multiple channels, customized to a client's specific needs. Its services cover three areas: Digital & Omni-Channel Customer Experience (ibex Connect), Digital Marketing and E-Commerce (ibex Digital), and Digital CX surveys and analytics (ibex CX). The ibex Connect business unit delivers differentiated customer service, technical support, revenue generation and other value-added outsourced back-office services to its clients. The ibex Digital offers digital marketing, e-commerce technology and platform solutions for brands.

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.

Ibex Ltd has a Value Score of 84, which is considered to be undervalued.

Ibex Ltd’s price-earnings ratio is 9.9 compared to the industry median at 48.8. This means that it has a lower price relative to its earnings compared to its peers. This makes Ibex Ltd more attractive for value investors.

Ibex Ltd’s price-to-book ratio is higher than its peers. This could make Ibex Ltd less attractive for value investors when compared to the industry median at 3.41.

You can read more about Ibex 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.

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 64, which is considered to be undervalued.

Immersion Corporation’s price-earnings ratio is 5.9 compared to the industry median at 48.8. This means that it has a lower price relative to its earnings compared to its peers. This makes Immersion Corporation more attractive for value investors.

Immersion Corporation’s price-to-book ratio is higher than its peers. This could make Immersion Corporation less attractive for value investors when compared to the industry median at 3.41.

You can read more about Immersion Corporation’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.

Porch Group Inc’s Value Grade

Value Grade:

Porch Group, Inc. is a vertical software company. The Company provides software and services to approximately 30,900 companies and small businesses, such as home inspectors, mortgage companies and loan officers, title companies, moving companies, real estate agencies, utility companies, roofers, insurance agencies, and others. The Company's segments include Vertical Software and Insurance. The Vertical Software segment provides software and services to home service companies. The Vertical Software segment has three types of customers: home service companies, consumers and service providers. The Insurance segment offers various property-related insurance policies through its risk-bearing carrier, independent agency, and risk-bearing home warranty companies. It operates under several brands in both the Vertical Software and Insurance segments, such as Floify, HireAHelper, Home Inspector Pro, iRoofing LLC, Rynoh, American Home Protect (AHP), Elite Insurance Group (EIG) and 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.

Porch Group Inc has a Value Score of 93, which is considered to be undervalued.

You can read more about Porch Group 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.

• AGM Group Holdings Inc stock has a Value Grade of A.
• CareCloud Inc stock has a Value Grade of A.
• HWH International Inc stock has a Value Grade of A.
• Ibex Ltd stock has a Value Grade of A.
• Immersion Corporation stock has a Value Grade of B.
• Porch Group Inc stock has a Value Grade of A.

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, February 26
• 7 Undervalued Software Stocks for Friday, February 23
• Why American Software, Inc.’s (AMSWA) Stock Is Up 11.26%
• Why Arteris Inc’s (AIP) Stock Is Down 6.26%

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.