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 IT Services & Consulting 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 IT Services & Consulting 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 IT Services & Consulting 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 IT Services & Consulting industry for Friday, March 22, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the IT Services & Consulting 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.

Cheer Holding Inc’s Value Grade

Value Grade:

Cheer Holding Inc, formerly Glory Star New Media Group Holdings Ltd, is a China-based company mainly engaged in the provision of next-generation mobile internet infrastructure and platform services. The Company is dedicated to building a digital ecosystem that integrates platforms, applications, technology, and industry into a cohesive system, thereby creating a new, open business environment for web3.0 that leverages artificial intelligence (AI) technology. The Company's portfolio includes a wide range of products and services, such as Polaris Intelligent Cloud, CHEERS Telepathy, CHEERS Open Platform, CHEERS Video, CHEERS e-Mall, CheerReal, CheerCar, CheerChat, CHEERS Fresh Group-Buying E-commerce Platform, Digital Innovation Research Institute, CHEERS Livestreaming, variety show series, IP short video matrix and more.

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.

Cheer Holding Inc has a Value Score of 95, which is considered to be undervalued.

When you look at Cheer Holding Inc’s price-to-sales ratio at 0.17 compared to the industry median at 1.80, this company has a lower price relative to revenue compared to its peers. This could make Cheer Holding Inc’s stock more attractive for value investors.

Cheer Holding Inc’s price-earnings ratio is 0.76 compared to the industry median at 26.96. This means it has a lower share price relative to earnings compared to its peers. This could make Cheer Holding Inc more attractive for value investors.

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. Cheer Holding Inc’s shareholder yield is lower than its industry median ratio of (1.03%). 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. Cheer Holding Inc’s price-to-book ratio is lower than its industry median ratio of 2.81. This could make Cheer Holding Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Cheer Holding Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Cheer Holding Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 23.70. This could make Cheer Holding Inc more attractive because the lower P/FCF ratio indicates that Cheer Holding 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.

Cuentas Inc’s Value Grade

Value Grade:

Cuentas, Inc., together with its subsidiaries, is mainly focused on financial technology services, delivering mobile financial services, prepaid debit and digital content services to unbanked, underbanked and underserved communities. The Company mainly invests in financial technology and engages in use of certain licensed technology to provide telecommunications, mobility, and remittance solutions to unserved, unbanked, and emerging markets. The Company uses technology and certain licensed technology to provide telecommunications and telecommunications mobility and remittance solutions in emerging markets. It also offers wholesale telecommunications minutes and prepaid telecommunications minutes to consumers through its Tel3 division. It operates in three segments, namely telecommunications, wholesale telecommunication services, and digital products and general purpose reloadable cards.

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.

Cuentas Inc has a Value Score of 67, which is considered to be undervalued.

Cuentas Inc’s price-to-book ratio is higher than its peers. This could make Cuentas Inc less attractive for value investors when compared to the industry median at 2.81.

You can read more about Cuentas 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.

DXC Technology Co’s Value Grade

Value Grade:

DXC Technology Company is a global information technology (IT) services company. The Company helps global companies run their mission-critical systems and operations while modernizing IT, optimizing data architectures, and ensuring security and scalability across public, private and hybrid clouds. Its segments include Global Business Services (GBS) and Global Infrastructure Services (GIS). The GBS segment provides technology solutions that help its customers address their business challenges and accelerate transformations adjusted to each customers industry and specific objectives. GBS offerings include analytics and engineering, applications, and insurance software and business process services. The GIS segment provides a portfolio of technology offerings that deliver predictable outcomes and measurable results while reducing business risk and operational costs for customers. GIS offerings include security, cloud infrastructure and IT outsourcing (ITO), and modern workplaces.

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.

DXC Technology Co has a Value Score of 99, which is considered to be undervalued.

DXC Technology Co’s price-to-book ratio is higher than its peers. This could make DXC Technology Co less attractive for value investors when compared to the industry median at 2.81.

You can read more about DXC Technology Co’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.

Aurora Mobile Ltd - ADR’s Value Grade

Value Grade:

Aurora Mobile Limited is a China-based company which maily operates mobile big data solutions platform. The Company provides a suite of services to mobile app developers. The Company’s developer services integrates with different types of mobile apps and provide core in-app functionalities needed by developers, including push notification, instant messaging, analytics, sharing and short message service (SMS). The Company mainly provide services to media, entertainment, gaming, financial services, tourism, ecommerce, education, healthcare and other fields.

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.

Aurora Mobile Ltd - ADR has a Value Score of 97, which is considered to be undervalued.

Aurora Mobile Ltd - ADR’s price-to-book ratio is higher than its peers. This could make Aurora Mobile Ltd - ADR less attractive for value investors when compared to the industry median at 2.81.

You can read more about Aurora Mobile 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.

Rackspace Technology, Inc.’s Value Grade

Value Grade:

Rackspace Technology, Inc. is an end-to-end multi-cloud technology services company. The Company designs, builds, and operates its customers? cloud environments across all technology platforms, irrespective of technology stack or deployment model. The Company operates through two segments: Public Cloud and Private Cloud. The Company?s Public Cloud segment is a services-centric, capital-light model providing value-added cloud solutions through managed services, elastic engineering and professional services offerings for customer environments hosted on the Amazon Web Services (AWS), Microsoft Azure and Google Cloud public cloud platforms. The Company?s Private Cloud segment is a technology-forward, capital-intensive model providing managed service offerings for customer environments hosted in one of its data centers as well as in those owned by customers or by third parties such as colocation providers. Private Cloud also includes its legacy OpenStack Public Cloud business.

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.

Rackspace Technology, Inc. has a Value Score of 81, which is considered to be undervalued.

You can read more about Rackspace 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.

Steel Connect Inc’s Value Grade

Value Grade:

Steel Connect, Inc. is a holding company which operates through its subsidiary, ModusLink Corporation. The Company is an end-to-end global supply chain solutions and e-commerce provider serving clients in markets such as consumer electronics, communications, computing, medical devices, software and retail. The Company designs and executes various elements in its clients global supply chains. The Company delivers its solutions through a combination of industry expertise, service solutions, integrated operations, business processes, a wide global footprint and technology. It produces and licenses an entitlement management solution powered by its enterprise-class Poetic software, which offers a complete solution for activation, provisioning, entitlement subscription, and data collection from physical goods (connected products) and digital products. It has an integrated network of facilities located in various countries, including numerous sites throughout North America, Europe and Asia.

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.

Steel Connect Inc has a Value Score of 83, which is considered to be undervalued.

Steel Connect Inc’s price-earnings ratio is 15.1 compared to the industry median at 27.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Steel Connect Inc more attractive for value investors.

Steel Connect Inc’s price-to-book ratio is higher than its peers. This could make Steel Connect Inc less attractive for value investors when compared to the industry median at 2.81.

You can read more about Steel Connect 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.

TDCX Inc (ADR)’s Value Grade

Value Grade:

TDCX Inc. is a Singapore-based company, which is a provider of digital customer experience solutions. The Company?s service offerings include omnichannel CX solutions, sales and digital marketing services, and content, trust and safety services. It also offers services consisting of miscellaneous activities, such as providing workspaces to existing clients and providing human resource and administration services to clients. It helps its clients manage their relationships by providing digital customer experiences solutions, such as after-sales service and customer support. Its sales and digital marketing services help its clients market their products and services to their customers in both the business-to-consumer (B2C) and the business-to-business (B2B) markets. Its content, trust and safety services comprise content monitoring and moderation services, trust and safety services and data annotation 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.

TDCX Inc (ADR) has a Value Score of 69, which is considered to be undervalued.

TDCX Inc (ADR)’s price-earnings ratio is 11.6 compared to the industry median at 27.0. This means that it has a lower price relative to its earnings compared to its peers. This makes TDCX Inc (ADR) more attractive for value investors.

TDCX Inc (ADR)’s price-to-book ratio is higher than its peers. This could make TDCX Inc (ADR) less attractive for value investors when compared to the industry median at 2.81.

You can read more about TDCX Inc (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 IT Services & Consulting 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 IT Services & Consulting stocks as well as other industrys.

Choosing Which of the 7 Best IT Services & Consulting 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.

• Cheer Holding Inc stock has a Value Grade of A.
• Cuentas Inc stock has a Value Grade of B.
• DXC Technology Co stock has a Value Grade of A.
• Aurora Mobile Ltd - ADR stock has a Value Grade of A.
• Rackspace Technology, Inc. stock has a Value Grade of A.
• Steel Connect Inc stock has a Value Grade of A.
• TDCX Inc (ADR) stock has a Value Grade of B.

Now that you have a bit more background about each of the 7 undervalued stocks in the IT Services & Consulting 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 IT Services & Consulting Stocks

Want to learn more about IT Services & Consulting 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 IT Services & Consulting Stocks for Friday, March 22
• 7 Undervalued IT Services & Consulting Stocks for Thursday, March 21
• What You Need to Know About Accenture Plc's Q2 Earnings
• Why Accenture Plc’s (ACN) Stock Is Down 9.31%

AAII Disclaimer

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