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 Wednesday, March 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.

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 67, which is considered to be undervalued.

When you look at Digital Turbine Inc’s price-to-sales ratio at 0.50 compared to the industry median at 3.69, 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 24.3, 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. Digital Turbine Inc’s shareholder yield is lower than its industry median ratio of (2.11%). 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 3.40. 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 32.50. 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.

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 68, which is considered to be undervalued.

Aware Inc’s price-to-book ratio is higher than its peers. This could make Aware Inc less attractive for value investors when compared to the industry median at 3.40.

You can read more about Aware 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.

Blackboxstocks Inc’s Value Grade

Value Grade:

Blackboxstocks, Inc. is a financial technology and social media hybrid platform company that is focused on offering real-time proprietary analytics and news for stock and options traders of all levels. The Company?s Web-based software Blackbox System, which is a disruptive financial technology platform combining proprietary analytics and broadcast enabled social media to connect traders of all types worldwide. It provides users with an interactive social media platform that is integrated into its dashboard, enabling users to exchange information and ideas through a common network. It offers a live audio/video feature that allows its members to broadcast on their own channels to share trading strategies and market insight within the Blackbox community. Its Web-based platform the Blackbox System employ predictive technology enhanced by artificial intelligence to find volatility and unusual market activity that may result in the change of the price of a stock or option.

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.

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

Blackboxstocks Inc’s price-to-book ratio is higher than its peers. This could make Blackboxstocks Inc less attractive for value investors when compared to the industry median at 3.40.

You can read more about Blackboxstocks 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.

FinVolution Group (ADR)’s Value Grade

Value Grade:

FinVolution Group, formerly PPDAI GROUP INC, is a China-based company mainly engaged in operating an online consumer finance platform. The Company’s products and services include loan services offered to borrowers, investment services offered to individual investors and institutional funding partners. The loan services offered to borrowers include standard loan products, consumption loan products and other loan products. The investment services offered to individual investors include self-discretionary investing tools, automated investing tools, investment programs and a secondary loan market. The Company also introduces borrowers to institutional funding partners and provides preliminary credit assessment services as well as other 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.

FinVolution Group (ADR) has a Value Score of 99, which is considered to be undervalued.

FinVolution Group (ADR)’s price-earnings ratio is 4.2 compared to the industry median at 50.5. This means that it has a lower price relative to its earnings compared to its peers. This makes FinVolution Group (ADR) more attractive for value investors.

FinVolution Group (ADR)’s price-to-book ratio is higher than its peers. This could make FinVolution Group (ADR) less attractive for value investors when compared to the industry median at 3.40.

You can read more about FinVolution Group (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.

HWH International Inc’s Value Grade

Value Grade:

HWH International Inc. is a lifestyle company. The Company operates through four segments: HWH Marketplace, Hapi Cafe, Hapi Travel and Hapi Wealth Builder. It develops new pathways to help people in their pursuit of health, wealth, and happiness. HWH Marketplace segment offers the 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 range of amenities, including food and beverages, co-working areas, virtual reality (VR) fitness zone and virtual travel previews. Hapi Travel offers vacation packages, hotels, cruises, and other travel products exclusively to HWH members. 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 educational programs at a significant discount. It operates two Hapi Cafe outlets in South Korea.

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 75, which is considered to be undervalued.

HWH International Inc’s price-earnings ratio is 188.0 compared to the industry median at 50.5. This means that it has a higher price relative to its earnings compared to its peers. This makes HWH International Inc less 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 3.40.

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.

Immersion Corporation’s Value Grade

Value Grade:

Immersion Corporation is a developer and provider of technologies for haptics. The Company develops, licenses, and supports a range of software and intellectual property (IP) that fully engage users senses of touch when operating digital devices. The Company offers licenses to its patented technology to its customers and offers its customers enabling software, related tools and technical assistance designed to integrate the Company's patented technology into its customers products or enhance the functionality of its patented technology. The Company's licenses enable its customers to deploy haptically enabled devices, content and other offerings, which they typically sell under their own brand names. It is focused on various target application areas, such as mobile devices, wearables, consumer, mobile entertainment and other content; virtual and augmented reality; console gaming; automotive; medical, and residential, commercial, and industrial Internet of Things.

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 61, which is considered to be undervalued.

Immersion Corporation’s price-earnings ratio is 7.2 compared to the industry median at 50.5. 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 3.40.

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.

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.

• Digital Turbine Inc stock has a Value Grade of B.
• Aware Inc stock has a Value Grade of B.
• Blackboxstocks Inc stock has a Value Grade of B.
• FinVolution Group (ADR) stock has a Value Grade of A.
• HWH International Inc stock has a Value Grade of B.
• Immersion Corporation 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 Wednesday, March 20
• 3 Undervalued Software Stocks for Tuesday, March 19
• What You Need to Know About Healthequity Inc's Q4 Earnings
• Why Arteris Inc’s (AIP) Stock Is Up 4.11%

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.