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, February 27, 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.

Digital Turbine Inc’s Value Grade

Value Grade:

Digital Turbine, Inc. is a provider of independent mobile growth platform that levels up the landscape for advertisers, publishers, carriers, and device original equipment manufacturers (OEMs). The Company offers end-to-end products and solutions leveraging technology to all participants in the mobile application ecosystem, enabling brand discovery and advertising, user acquisition and engagement, and operational efficiency for advertisers. Its segments include On Device Solutions (ODS) and App Growth Platform (AGP). Its ODS segment consists of products and services that simplify the discovery and delivery of mobile applications and content media for device end-users. Its AGP segment consists of Advertising Solutions and Ad Monetization Solutions. Its Advertising Solutions serve two key segments: App Developers, and Brands and Agencies, which enables them to execute targeted mobile campaigns on the Company?s direct application inventory.

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.

Digital Turbine Inc has a Value Score of 63, which is considered to be undervalued.

When you look at Digital Turbine Inc’s price-to-sales ratio at 0.55 compared to the industry median at 3.57, this company has a lower price relative to revenue compared to its peers. This could make Digital Turbine Inc’s stock more attractive for value investors.

Now, let’s assess Digital Turbine Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 15.6, when compared to the industry median of 24.2, 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. Digital Turbine Inc’s shareholder yield is higher than its industry median ratio of (2.54%). 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. Digital Turbine Inc’s price-to-book ratio is lower than its industry median ratio of 3.45. This could make Digital Turbine Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Digital Turbine Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Digital Turbine Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 34.62. This could make Digital Turbine Inc more attractive because the lower P/FCF ratio indicates that Digital Turbine 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.

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 9.8 compared to the industry median at 48.2. 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 3.45.

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.

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 73, which is considered to be undervalued.

Oppfi Inc’s price-earnings ratio is 7.0 compared to the industry median at 48.2. 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 3.45.

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.

Smith Micro Software Inc’s Value Grade

Value Grade:

Smith Micro Software, Inc. is engaged in developing software to simplify the mobile experience. The Company is providing solutions to wireless and cable service providers around the world. The Company?s product portfolio includes SafePath, CommSuite, and ViewSpot. The SafePath includes SafePath Family, SafePath IoT, and SafePath Home. Its SafePath product suite provides tools to protect family digital lifestyles and manage connected devices both inside and outside the home. The CommSuite premium messaging platform enables mobile service providers to deliver a voicemail experience to mobile subscribers. CommSuite also enables multi-language Voice-to-Text (VTT) transcription messaging, which facilitates convenient message consumption for users by reading versus listening. CommSuite is available to both postpaid premium subscribers, as well as prepaid subscribers. Its ViewSpot includes a retail display management platform, which provides wireless carriers and retailers.

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.

Smith Micro Software Inc has a Value Score of 63, which is considered to be undervalued.

Smith Micro Software Inc’s price-to-book ratio is higher than its peers. This could make Smith Micro Software Inc less attractive for value investors when compared to the industry median at 3.45.

You can read more about Smith Micro 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.

Treasure Global Inc’s Value Grade

Value Grade:

Treasure Global Inc. is a holding company, which is engaged in developing technology platforms. The Company has created an online-to-offline (O2O) e-commerce platform business model offering consumers and merchants instant rebates and affiliate cashback programs, while providing an e-payment solution with rebates in both e-commerce and physical retailers/merchant settings. It operates through its subsidiaries, namely ZCity Sdn. Bhd. (ZCITY); AY Food Ventures Sdn Bhd; Morgan Global Sdn. Bhd, and Foodlink Global Sdn Bhd. ZCity Sdn. Bhd. owns all intellectual property rights to copyrightable, patentable, and other protectable intangible assets relating to its business, including trademarks. Its proprietary product is an Internet application (or App) branded ZCITY App, which is developed through its wholly owned subsidiary, ZCITY. The ZCITY App targets consumers through the provision of personalized deals based on consumers purchase history, location, and preferences.

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.

Treasure Global Inc has a Value Score of 69, which is considered to be undervalued.

Treasure Global Inc’s price-to-book ratio is higher than its peers. This could make Treasure Global Inc less attractive for value investors when compared to the industry median at 3.45.

You can read more about Treasure Global 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.

• Digital Turbine Inc stock has a Value Grade of B.
• Ibex Ltd stock has a Value Grade of A.
• Oppfi Inc stock has a Value Grade of B.
• Smith Micro Software Inc stock has a Value Grade of B.
• Treasure Global Inc stock has a Value Grade of B.

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, February 27
• Which Is a Better Investment, Cellebrite DI Ltd or Docebo Inc Stock?
• Which Is a Better Investment, Docebo Inc or Zeta Global Holdings Corp Stock?
• 6 Undervalued Software Stocks for Monday, February 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.