Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 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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4 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 4 undervalued stocks in the IT Services & Consulting industry for Friday, May 03, 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.

Creative Realities Inc’s Value Grade

Value Grade:

Creative Realities, Inc. provides digital signage and media solutions to enhance communications in a variety of out-of-home environments, key market segments and use cases, including retail, entertainment and sports venues, restaurants, including quick-serve restaurants (QSR), convenience stores, financial services, automotive, medical and healthcare facilities, mixed use developments, corporate communications, employee experience and digital out of home (DOOH) advertising networks. Its platforms include ReflectView, Reflect Xperience, Reflect AdLogic, Clarity, Reflect Zero Touch, iShowroomProX and OSx+. Reflect Xperience is a web-based interface that allows customers to give content scheduling access to local users via the web or mobile devices, while still maintaining centralized programming control. Its technology and solutions include Digital Merchandising Systems, Digital Sales Assistants, Digital Way-Finders, Digital Kiosks, Digital Menu-Board Systems and Dynamic Digital Signage.

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.

Creative Realities Inc has a Value Score of 65, which is considered to be undervalued.

When you look at Creative Realities Inc’s price-to-sales ratio at 0.74 compared to the industry median at 1.60, this company has a lower price relative to revenue compared to its peers. This could make Creative Realities Inc’s stock more attractive for value investors.

Now, let’s assess Creative Realities Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 7.8, when compared to the industry median of 15.2, 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. Creative Realities Inc’s shareholder yield is lower than its industry median ratio of (1.31%). 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. Creative Realities Inc’s price-to-book ratio is lower than its industry median ratio of 2.62. This could make Creative Realities Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Creative Realities Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Creative Realities Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 21.31. This could make Creative Realities Inc more attractive because the lower P/FCF ratio indicates that Creative Realities 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.

Castellum Inc’s Value Grade

Value Grade:

Castellum, Inc. is a technology company in the areas of cybersecurity, information technology (IT), electronic warfare, information warfare, and information operations with businesses in the defense, federal, civilian, and commercial markets. Its services include intelligence analysis, software development, software engineering, program management, strategic and mission planning, information assurance, cybersecurity and policy support, data analytics and model-based systems engineering (MBSE). The Company develops information warfare and information operations (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; 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 63, which is considered to be undervalued.

Castellum Inc’s price-to-book ratio is higher than its peers. This could make Castellum Inc less attractive for value investors when compared to the industry median at 2.62.

You can read more about Castellum 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.

Telus International Cda Inc’s Value Grade

Value Grade:

TELUS International (Cda) Inc. is a customer experience (CX) innovator that designs, builds and delivers high-tech, high-touch digital solutions, including artificial intelligence (AI) and content moderation for global brands. The Company operates through its subsidiary TELUS Corporation, a communications and information technology company. The Company offers a range of solutions, such as digital experience, customer experience, information technology (IT) lifecycle, advisory services, trust, safety and security, and back office and automation. The Company serves technology, games, communications & media, ecommerce, financial technology and financial services, healthcare, travel & hospitality and automotive. The Company provides scalable data annotation services for text, images, videos and audio. The Company sources multilingual training data in approximately 500 languages. The Company is also a full-service digital product provider through WillowTree.

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.

Telus International Cda Inc has a Value Score of 71, which is considered to be undervalued.

Telus International Cda Inc’s price-earnings ratio is 33.0 compared to the industry median at 25.8. This means that it has a higher price relative to its earnings compared to its peers. This makes Telus International Cda Inc less attractive for value investors.

Telus International Cda Inc’s price-to-book ratio is higher than its peers. This could make Telus International Cda Inc less attractive for value investors when compared to the industry median at 2.62.

You can read more about Telus International Cda 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.

VNET Group Inc - ADR’s Value Grade

Value Grade:

VNET Group Inc, formerly 21Vianet Group Inc, is a carrier-neutral Internet data center services provider. The Company hosts its customers' servers and networking equipment and provides interconnectivity. The Company also provides managed network services to enable customers to deliver data across the Internet through its data transmission network and smart routing technology. The Company provides value-added services, such as content delivery network services, virtual private network services and last-mile wired broadband services. It offers public cloud services, private cloud and hybrid services. The Company also offers container-based data center service. The Company's service offerings include hosting and related services, and managed network services. The Company provides hosting and related services to house servers and networking equipment in its data centers and connects them through its data transmission network, and offers other hosting related value-added 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.

VNET Group Inc - ADR has a Value Score of 78, which is considered to be undervalued.

VNET Group Inc - ADR’s price-to-book ratio is higher than its peers. This could make VNET Group Inc - ADR less attractive for value investors when compared to the industry median at 2.62.

You can read more about VNET Group 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 4 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.

• Creative Realities Inc stock has a Value Grade of B.
• Castellum Inc stock has a Value Grade of B.
• Telus International Cda Inc stock has a Value Grade of B.
• VNET Group Inc - ADR stock has a Value Grade of B.

Now that you have a bit more background about each of the 4 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.

• 4 Undervalued IT Services & Consulting Stocks for Friday, May 03
• 3 Undervalued IT Services & Consulting Stocks for Thursday, May 02
• What You Need to Know About Grid Dynamics Holdings Inc's Q1 Earnings
• Why Alkami Technology Inc’s (ALKT) Stock Is Up 9.39%

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.