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 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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6 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 6 undervalued stocks in the IT Services & Consulting industry for Monday, March 25, 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.

Castellum Inc’s Value Grade

Value Grade:

Castellum Inc. is a technology company. It is engaged in cybersecurity, software development, systems engineering, information / electronic warfare, program support and data analytics services. It offers artificial intelligence / machine learning, 5G technologies, model-based systems engineering, program management, information assurance, intelligence analysis, and cybersecurity maturity model certification compliance. It specializes in planning and intelligence support for information warfare and information operations (IW/IO). It develops IW/IO plans, exercises, doctrine, and training for the Military Services and the Combatant Commands in domestic and deployed overseas locations. It provides platform integration, modernization, and sustainment; system engineering; naval architecture; training and simulation services, and logistics engineering. It offers expertise and technology to defense, intelligence, and civilian agencies of the United States federal, state and local governments.

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.

Castellum Inc has a Value Score of 61, which is considered to be undervalued.

When you look at Castellum Inc’s price-to-sales ratio at 0.31 compared to the industry median at 1.78, this company has a lower price relative to revenue compared to its peers. This could make Castellum Inc’s stock 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. Castellum 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. Castellum Inc’s price-to-book ratio is lower than its industry median ratio of 2.81. This could make Castellum Inc more attractive to investors looking for a new addition to their portfolio.

Formula Systems 1985 Ltd (ADR)’s Value Grade

Value Grade:

Formula Systems (1985) Ltd. (Formula) is a global information technology (IT) solutions and services holding company. The Company, through its directly held subsidiary and affiliated companies, is engaged in providing software solutions and services, software product marketing and support, computer infrastructure and integration solutions, and learning and integration. The Company operates through two segments: software services and IT professional services. The software services segment develops markets, sells and supports an application platform, software applications, business and process integration solutions, and related services. The IT professional services segment offers IT services in the areas of infrastructure design and delivery, application development, technology planning and implementation services, communications services and solutions, as well as supplemental outsourcing 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.

Formula Systems 1985 Ltd (ADR) has a Value Score of 64, which is considered to be undervalued.

Formula Systems 1985 Ltd (ADR)’s price-earnings ratio is 20.1 compared to the industry median at 28.8. This means that it has a lower price relative to its earnings compared to its peers. This makes Formula Systems 1985 Ltd (ADR) more attractive for value investors.

Formula Systems 1985 Ltd (ADR)’s price-to-book ratio is higher than its peers. This could make Formula Systems 1985 Ltd (ADR) less attractive for value investors when compared to the industry median at 2.81.

You can read more about Formula Systems 1985 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.

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.

Soluna Holdings Inc’s Value Grade

Value Grade:

Soluna Holdings, Inc. is a developer of green data centers that convert excess renewable energy into global computing resources. The Company builds modular, scalable data centers for computing applications, such as Bitcoin mining, artificial intelligence (AI), and machine learning. It provides an alternative to battery storage or transmission lines. Its data centers enable clean electricity asset owners to sell. The Company conducts its business through its wholly owned subsidiary, Soluna Computing, Inc. (SCI). It operates through two segments: cryptocurrency mining and data hosting. Under cryptocurrency mining segment, SCI engages in cryptocurrency mining by which transactions between cryptocurrency users are verified and added to the blockchain public ledger. Under data hosting segment, it provides electrical power and network connectivity to cryptocurrency mining customers. Its data centers are operated through various projects: Project Edith, Project Sophie, and Project Dorothy.

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.

Soluna Holdings Inc has a Value Score of 71, which is considered to be undervalued.

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

You can read more about Soluna Holdings 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.

System1 Inc’s Value Grade

Value Grade:

System1, Inc. operates an omnichannel customer acquisition platform, delivering high-intent customers to advertisers. The Company provides its omnichannel customer acquisition platform services through its proprietary responsive acquisition marketing platform (RAMP). The Company’s Owned and Operated Advertising segment is engaged in directly acquiring traffic to its owned and operated websites and utilizing the RAMP platform and related services to connect advertising partners to its owned and operated websites. Its Partner Network segment is engaged in sharing arrangements with network partners for the use of the RAMP platform, and related services provided to them to direct advertising by the advertising partners to their advertising space. RAMP operates across its network of owned and operated websites and related products, allowing it to monetize user traffic that it sources from various acquisition marketing channels, including Google, Facebook, Taboola and Zemanta.

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.

System1 Inc has a Value Score of 99, which is considered to be undervalued.

System1 Inc’s price-to-book ratio is higher than its peers. This could make System1 Inc less attractive for value investors when compared to the industry median at 2.81.

You can read more about System1 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 68, which is considered to be undervalued.

TDCX Inc (ADR)’s price-earnings ratio is 11.7 compared to the industry median at 28.8. 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 6 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.

• Castellum Inc stock has a Value Grade of B.
• Formula Systems 1985 Ltd (ADR) stock has a Value Grade of B.
• Aurora Mobile Ltd - ADR stock has a Value Grade of A.
• Soluna Holdings Inc stock has a Value Grade of B.
• System1 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 6 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.

• 6 Undervalued IT Services & Consulting Stocks for Monday, March 25
• 7 Undervalued IT Services & Consulting Stocks for Friday, March 22
• Why EPAM Systems Inc’s (EPAM) Stock Is Down 4.54%
• Why Grid Dynamics Holdings Inc’s (GDYN) Stock Is Down 5.71%

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.