Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 7 stocks made the list for top value stocks in the Communications & Networking 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 Communications & Networking 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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7 Undervalued Communications & Networking Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 7 undervalued stocks in the Communications & Networking industry for Monday, March 18, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Communications & Networking 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.

ADT Inc’s Value Grade

Value Grade:

ADT Inc. is engaged in providing of security, interactive, and smart home solutions serving residential and small business customers in the United States. The Company operates through two segments: Consumer and Small Business (CSB) and Solar. The CSB segment primarily includes the sale, installation, servicing, and monitoring of integrated security and automation systems and other related offerings to owners and renters of residential properties, small business operators, and other individual consumers. The Solar segment primarily includes the sale and installation of solar systems and related solutions and services to residential homeowners. Its security offerings include burglar and life safety alarms, smart security cameras, smart home automation systems, and video surveillance systems. It designs, install, and sell custom residential solar systems and energy storage solutions, energy efficiency upgrades, and roofing services through dedicated and specialized in-house sales.

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.

ADT Inc has a Value Score of 85, which is considered to be undervalued.

When you look at ADT Inc’s price-to-sales ratio at 1.15 compared to the industry median at 1.15, this company has a higher price relative to revenue compared to its peers. This could make ADT Inc’s stock fairly attractive for value investors.

Now, let’s assess ADT Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 5.7, when compared to the industry median of 12.1, 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. ADT Inc’s shareholder yield is higher than its industry median ratio of (0.25%). 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. ADT Inc’s price-to-book ratio is lower than its industry median ratio of 1.64. This could make ADT Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at ADT Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. ADT Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 16.55. This could make ADT Inc more attractive because the lower P/FCF ratio indicates that ADT 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.

Digital Ally Inc’s Value Grade

Value Grade:

Digital Ally, Inc. is engaged in video solution technology, human and animal health protection products, healthcare revenue cycle management, ticket brokering and marketing, event production and jet chartering. The Company?s segments include Video Solutions, Revenue Cycle Management, and Entertainment. The Video Solutions segment produces digital video imaging, storage products, disinfectants, and related safety products for use in law enforcement, security, and commercial applications. This segment includes both service and product through its subscription models offering cloud and warranty solutions, and hardware sales for video and health safety solutions. Revenue Cycle Management Segment provides billing, verification, and related services to medical providers throughout the Country. It provides working capital and back-office services. Its Entertainment segment acts as an intermediary between ticket buyers and sellers within its secondary ticketing platform, ticketsmarter.com.

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 Ally Inc has a Value Score of 79, which is considered to be undervalued.

Digital Ally Inc’s price-to-book ratio is higher than its peers. This could make Digital Ally Inc less attractive for value investors when compared to the industry median at 1.64.

You can read more about Digital Ally 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.

Electronic Systems Technology Inc’s Value Grade

Value Grade:

Electronic Systems Technology, Inc. is engaged in the development and manufacturing of digital data (non-voice) radio transceivers for use in industrial wireless networking applications. It designs, develops, manufactures and markets the ESTeem line of industrial wireless products and accessories. The Company?s ESTeem line of products provides communication solutions for applications underutilized by conventional, commercial grade communication systems. Its products include ESTeem Models, such as 210M, 195M, 195C, 195H, Horizon900, Horizon2.4MIMO, Horizon4.9, Horizon5.8 and Edge900. It manufactures over nine models of the ESTeem industrial wireless modems that operate in frequency from 150 megahertz to 5.8 gigahertz. It offers product lines in markets for process automation in commercial, industrial and government arenas domestically as well as internationally. The Company offers various accessories to support the ESTeem products, such as antennas, power supplies and cable assemblies.

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.

Electronic Systems Technology Inc has a Value Score of 75, which is considered to be undervalued.

Electronic Systems Technology Inc’s price-to-book ratio is higher than its peers. This could make Electronic Systems Technology Inc less attractive for value investors when compared to the industry median at 1.64.

You can read more about Electronic Systems 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.

KVH Industries, Inc.’s Value Grade

Value Grade:

KVH Industries, Inc. is a provider of technology-driven connectivity solutions to primarily maritime customers globally. The Company designs, manufactures, and provides connectivity and content services globally. It provides global high-speed Internet and Voice over Internet Protocol (VoIP) services via satellite to mobile users at sea and on land. It is also a provider of commercially licensed entertainment, including news, sports, music, and movies, to commercial customers in the maritime and hotel markets, along with supplemental value-added services. On the hardware side of its business, it primarily manufactures and distributes a family of mobile satellite antenna products that provide two-way access to the Internet and VoIP services outside the range of cellular phone service, along with in-motion, stabilized antennas that provide receive-only satellite television services. The Company?s brands include TracVision, TracNet, KVH ONE, TracPhone, KVH Link and TVlink, 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.

KVH Industries, Inc. has a Value Score of 80, which is considered to be undervalued.

KVH Industries, Inc.’s price-to-book ratio is higher than its peers. This could make KVH Industries, Inc. less attractive for value investors when compared to the industry median at 1.64.

You can read more about KVH Industries, 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.

Quarterhill Inc’s Value Grade

Value Grade:

Quarterhill Inc. is a Canada-based company, which is engaged in providing tolling and enforcement solutions in the Intelligent Transportation System (ITS) industry. The Company provides end-to-end mobility systems to some of the tolling authorities in the United States, including in Texas, California and Illinois through Electronic Transaction Consultants, LLC (ETC). ETC’s core products comprise the riteSuite platform, a scalable and customizable cloud-based tolling and mobility solution. The platform has applications for the roadside and back office, with strengths in vehicle identification, tracking, dynamic pricing and interoperability amongst agencies. The Company’s wholly owned subsidiary is International Road Dynamics Inc. (IRD), is a multi-discipline, technology company and provider of Intelligent Transportation Systems. It provides integrate ITS technologies into systems designed to solve and challenging transportation problems.

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.

Quarterhill Inc has a Value Score of 76, which is considered to be undervalued.

Quarterhill Inc’s price-to-book ratio is higher than its peers. This could make Quarterhill Inc less attractive for value investors when compared to the industry median at 1.64.

You can read more about Quarterhill 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.

UTStarcom Holdings Corp’s Value Grade

Value Grade:

UTStarcom Holdings Corp. provides broadband products, solution and services. The Company delivers broadband transport and access (both wireless fidelity (Wi-Fi) and fixed line) products and solutions, optimized for mobile backhaul, metro aggregation, broadband access and Wi-Fi data offloading. Its segments include Equipment, which is focused on its equipment sales, including network infrastructure and application products, and Services, which is engaged in providing services and support of its equipment products and also the new operational support segment. The broadband product lines include family of packet transport network (PTN) products based on multi-protocol label switch transport profile (MPLS-TP) and carrier Ethernet (CE) technologies enhanced through in-house software-defined networking (SDN) platform to support the network evolution, and multi services access network (MSAN) platform. Wireless broadband access is represented by end-to-end Carrier Wi-Fi solution.

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.

UTStarcom Holdings Corp has a Value Score of 64, which is considered to be undervalued.

You can read more about UTStarcom Holdings 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.

Vtech Holdings Ltd (ADR)’s Value Grade

Value Grade:

VTech Holdings Limited is a Hong Kong-based investment holding company principally engaged in electronic products-related businesses. Its main businesses include the design, manufacture and distribution of consumer electronic products, such as electronic education toys and phones, among others. The Company operates through four geographical segments, including North America, Europe, Asia Pacific 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.

Vtech Holdings Ltd (ADR) has a Value Score of 83, which is considered to be undervalued.

Vtech Holdings Ltd (ADR)’s price-earnings ratio is 9.1 compared to the industry median at 22.1. This means that it has a lower price relative to its earnings compared to its peers. This makes Vtech Holdings Ltd (ADR) more attractive for value investors.

Vtech Holdings Ltd (ADR)’s price-to-book ratio is lower than its peers. This could make Vtech Holdings Ltd (ADR) more attractive for value investors when compared to the industry median at 1.64.

You can read more about Vtech Holdings Ltd (ADR)’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 Communications & Networking 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 Communications & Networking stocks as well as other industrys.

Choosing Which of the 7 Best Communications & Networking 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.

• ADT Inc stock has a Value Grade of A.
• Digital Ally Inc stock has a Value Grade of B.
• Electronic Systems Technology Inc stock has a Value Grade of B.
• KVH Industries, Inc. stock has a Value Grade of B.
• Quarterhill Inc stock has a Value Grade of B.
• UTStarcom Holdings Corp stock has a Value Grade of B.
• Vtech Holdings Ltd (ADR) stock has a Value Grade of A.

Now that you have a bit more background about each of the 7 undervalued stocks in the Communications & Networking 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 Communications & Networking Stocks

Want to learn more about Communications & Networking 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.

• 7 Undervalued Communications & Networking Stocks for Monday, March 18
• 6 Undervalued Communications & Networking Stocks for Friday, March 15
• Why ADT Inc’s (ADT) Stock Is Down 7.53%
• 5 Undervalued Communications & Networking Stocks for Thursday, March 14

AAII Disclaimer

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