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 Online Services 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 Online Services 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 Online Services 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 Online Services industry for Thursday, April 11, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Online Services 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.

Alibaba Group Holding Ltd - ADR’s Value Grade

Value Grade:

Alibaba Group Holding Ltd provides technology infrastructure and marketing platforms. The Company operates through seven segments. China Commerce segment includes China retail commerce businesses such as Taobao, Tmall and Freshippo, among others, and wholesale business. International Commerce segment includes international retail and wholesale commerce businesses such as Lazada and AliExpress. Local Consumer Services segment includes location-based businesses such as Ele.me, Amap, Fliggy and others. Cainiao segment includes domestic and international one-stop-shop logistics services and supply chain management solutions. Cloud segment provides public and hybrid cloud services like Alibaba Cloud and DingTalk for domestic and foreign enterprises. Digital Media and Entertainment segment includes Youku, Quark and Alibaba Pictures, other content and distribution platforms and online games business. Innovation Initiatives and Others segment include Damo Academy, Tmall Genie 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.

Alibaba Group Holding Ltd - ADR has a Value Score of 77, which is considered to be undervalued.

When you look at Alibaba Group Holding Ltd - ADR’s price-to-sales ratio at 1.46 compared to the industry median at 1.48, this company has a lower price relative to revenue compared to its peers. This could make Alibaba Group Holding Ltd - ADR’s stock more attractive for value investors.

Alibaba Group Holding Ltd - ADR’s price-earnings ratio is 13.90 compared to the industry median at 28.44. This means it has a lower share price relative to earnings compared to its peers. This could make Alibaba Group Holding Ltd - ADR more attractive for value investors.

Now, let’s assess Alibaba Group Holding Ltd - ADR’s EV/EBITDA ratio, also known as enterprise multiple. At 7.0, when compared to the industry median of 13.3, 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. Alibaba Group Holding Ltd - ADR’s shareholder yield is higher than its industry median ratio of (1.92%). 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. Alibaba Group Holding Ltd - ADR’s price-to-book ratio is lower than its industry median ratio of 2.03. This could make Alibaba Group Holding Ltd - ADR more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Alibaba Group Holding Ltd - ADR’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Alibaba Group Holding Ltd - ADR’s price-to-free-cash-flow ratio is lower than its industry median ratio of 26.30. This could make Alibaba Group Holding Ltd - ADR more attractive because the lower P/FCF ratio indicates that Alibaba Group Holding Ltd - ADR 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.

Beachbody Company Inc’s Value Grade

Value Grade:

The Beachbody Company, Inc. is a subscription health and wellness company. The Company's products include digital subscriptions, nutritional products and connected fitness products. Its digital subscriptions include BOD and a live interactive premium subscription, BODi. The Company's digital platforms provide a one-stop-shop for all types of fitness and nutrition content, with brands such as P90X, Insanity, 21 Day Fix, 80 Day Obsession, LIIFT4, Unstress Meditations, Portion Fix, 4 Weeks of Focus, Sure Thing, and others. The Company's nutrition-first programs, Portion Fix and 2B Mindset, teach healthy eating habits and promote healthy, sustainable weight loss. Its offerings deliver both fitness and nutritional content, and personal development mindset content. Its nutritional products include Shakeology, Beachbody Performance supplements, BEACHBARs and Bevvy supplements and others. Its digital subscription offerings are complemented by its connected fitness products acquired from Myx.

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.

Beachbody Company Inc has a Value Score of 81, which is considered to be undervalued.

Beachbody Company Inc’s price-to-book ratio is higher than its peers. This could make Beachbody Company Inc less attractive for value investors when compared to the industry median at 2.03.

You can read more about Beachbody Company 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.

Gravity Co., LTD. (ADR)’s Value Grade

Value Grade:

Gravity Co., Ltd. is a developer, distributor and publisher of online games in Japan and Taiwan. The Company's segments include online games, mobile games and other. Its principal product includes Ragnarok Online, which is a multiplayer online role playing game. It categorizes products into over three categories, such as online games; mobile games and applications, and other games and game-related products and services, including character-based merchandise and animation. It offers over five online games, such as Ragnarok Online, Ragnarok Online II, Requiem, Dragonica (Dragon Saga) and R.O.S.E. Online, which are action adventure massively multiplayer online role-playing games (MMORPG). It develops mobile games, including Ragnarok Online-Uprising: Valkyrie, Ragnarok Online Mobile Story and Ragnarok Violet, and also publishes mobile games licensed from third parties. It provides games for game consoles and handheld game consoles, such as Nintendo DS, Xbox 360 and the PlayStation series.

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.

Gravity Co., LTD. (ADR) has a Value Score of 87, which is considered to be undervalued.

Gravity Co., LTD. (ADR)’s price-earnings ratio is 4.7 compared to the industry median at 28.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Gravity Co., LTD. (ADR) more attractive for value investors.

Gravity Co., LTD. (ADR)’s price-to-book ratio is higher than its peers. This could make Gravity Co., LTD. (ADR) less attractive for value investors when compared to the industry median at 2.03.

You can read more about Gravity Co., 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.

Liberty Tripadvisor Holdings Inc’s Value Grade

Value Grade:

Liberty TripAdvisor Holdings, Inc., through its subsidiary, Tripadvisor, Inc. (Tripadvisor), provides a travel platform, aggregating reviews and opinions from its community of travelers about accommodations, restaurants, experiences, airlines and cruises throughout the world. Tripadvisor operates through three segments: Brand Tripadvisor, Viator and TheFork. The Brand Tripadvisor segment includes Tripadvisor-branded hotels, media and advertising, and Tripadvisor experiences and dining business. The Viator segment provides an online marketplace that allows travelers to research and book tours, activities and attractions in popular travel destinations across the globe through its Viator branded platform, which includes Website, mobile Web, and mobile app. TheFork segment offers travelers and diners an online marketplace that provides access to approximately 55,000 restaurants to discover and book reservations in 11 countries across the United Kingdom, and western and central Europe.

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.

Liberty Tripadvisor Holdings Inc has a Value Score of 94, which is considered to be undervalued.

You can read more about Liberty Tripadvisor 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.

Playtika Holding Corp’s Value Grade

Value Grade:

Playtika Holding Corp is a developer of mobile games. The Company’s Playtika Boost Platform provides live game operations services and a proprietary technology to support portfolio of games. The Company owns and manages 15 games. It includes both casual and casino-themed games. The Company also provides free-to-play mobile games. The Company distributes its games through various web and mobile platforms such as Apple, Facebook, Google, and other web and mobile platforms. The Company’s games include Slotomania, Bingo Blitz, House of Fun, Caesars Slots, World Series of Poker, Best Fiends, June’s Journey, Solitaire Grand Harvest, and Board Kings. The Company’s games are available on iOS App Store and Google Play Store.

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.

Playtika Holding Corp has a Value Score of 88, which is considered to be undervalued.

Playtika Holding Corp’s price-earnings ratio is 10.9 compared to the industry median at 28.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Playtika Holding Corp more attractive for value investors.

You can read more about Playtika Holding 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.

Vipshop Holdings Ltd - ADR’s Value Grade

Value Grade:

Vipshop Holdings Limited is a holding company. The Company is an online discount retailer for brands in China. The Company offers branded products to consumers in China through flash sales mainly on its vip.com Website. The Company's segment is sales, product distribution and offering of goods on its online platforms. The Company conducts its business through its subsidiaries and consolidated affiliated entities in China. Through its flash sales model, the Company sells limited quantities of discounted branded products online for limited periods of time. The Company offers diversified product offerings from over 17,000 domestic and international brands, including apparel for women, men and children, fashion goods, cosmetics, home goods and other lifestyle products. The Company offers a range of products and services for consumers through lefeng.com, specializing in branded cosmetics, apparel, healthcare products, food and other consumer products.

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.

Vipshop Holdings Ltd - ADR has a Value Score of 94, which is considered to be undervalued.

Vipshop Holdings Ltd - ADR’s price-earnings ratio is 8.5 compared to the industry median at 28.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Vipshop Holdings Ltd - ADR more attractive for value investors.

Vipshop Holdings Ltd - ADR’s price-to-book ratio is higher than its peers. This could make Vipshop Holdings Ltd - ADR less attractive for value investors when compared to the industry median at 2.03.

You can read more about Vipshop 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 Online Services 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 Online Services stocks as well as other industrys.

Choosing Which of the 6 Best Online Services 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.

• Alibaba Group Holding Ltd - ADR stock has a Value Grade of B.
• Beachbody Company Inc stock has a Value Grade of A.
• Gravity Co., LTD. (ADR) stock has a Value Grade of A.
• Liberty Tripadvisor Holdings Inc stock has a Value Grade of A.
• Playtika Holding Corp stock has a Value Grade of A.
• Vipshop Holdings Ltd - ADR stock has a Value Grade of A.

Now that you have a bit more background about each of the 6 undervalued stocks in the Online Services 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 Online Services Stocks

Want to learn more about Online Services 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 Online Services Stocks for Thursday, April 11
• 3 Undervalued Online Services Stocks for Wednesday, April 10
• Why CarGurus Inc’s (CARG) Stock Is Down 4.23%
• Why CoStar Group Inc’s (CSGP) Stock Is Down 5.27%

AAII Disclaimer

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