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 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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7 Undervalued Software 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 Software industry for Wednesday, May 22, 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.

CareCloud Inc’s Value Grade

Value Grade:

CareCloud, Inc. is a healthcare information technology company. The Company provides a suite of cloud-based solutions and related business services, to healthcare providers, from small practices to enterprise medical groups, hospitals, and health systems throughout the United States. Its segments include Healthcare IT and Medical Practice Management. Healthcare IT segment includes technology-assisted revenue cycle management, software-as-a-service (SaaS) solutions and other services. Medical Practice Management segment includes the management of three medical practices. Its technology-enabled business solutions include revenue cycle management; Cloud-based software; Digital health; and Healthcare IT professional services & staffing. Its SaaS platforms include practice management (PM), electronic health record (EHR), patient experience management (PXM), and others. Its Revenue Cycle Management services including end-to-end medical billing, eligibility, analytics, and related 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.

CareCloud Inc has a Value Score of 89, which is considered to be undervalued.

When you look at CareCloud Inc’s price-to-sales ratio at 0.42 compared to the industry median at 3.80, this company has a lower price relative to revenue compared to its peers. This could make CareCloud Inc’s stock more attractive for value investors.

Now, let’s assess CareCloud Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 2.0, when compared to the industry median of 25.5, 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. CareCloud Inc’s shareholder yield is lower than its industry median ratio of (2.45%). 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. CareCloud Inc’s price-to-book ratio is lower than its industry median ratio of 3.23. This could make CareCloud Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at CareCloud Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. CareCloud Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 30.06. This could make CareCloud Inc more attractive because the lower P/FCF ratio indicates that CareCloud 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.

Consensus Cloud Solutions Inc’s Value Grade

Value Grade:

Consensus Cloud Solutions, Inc. is a digital fax provider. The Company provides secure information delivery services with a scalable software-as-a-service platform. It provides data transformation solutions for regulated industries such as healthcare, finance, insurance, real estate and manufacturing, as well as technology for state and the federal government. Its solutions consist of cloud faxing; digital signature; intelligent data extraction using natural language processing and artificial intelligence; robotic process automation; interoperability; workflow enhancement, and a connectivity and integration engine for healthcare providers. The Company's solutions can be combined with managed services for optimal outcomes. Its small office/home office (SoHo) brands include eFax, jSign, MyFax, Sfax, Metrofax, and SRfax. Its solutions include eFax Corporate, ECFax, Unite, jSign, Conductor, Clarity and eFax. Conductor is a robust interface engine and complete interoperability platform.

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.

Consensus Cloud Solutions Inc has a Value Score of 96, which is considered to be undervalued.

Consensus Cloud Solutions Inc’s price-earnings ratio is 4.5 compared to the industry median at 47.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Consensus Cloud Solutions Inc more attractive for value investors.

You can read more about Consensus Cloud Solutions 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.

Ibex Ltd’s Value Grade

Value Grade:

IBEX Limited is a provider in global business process outsourcing and end-to-end customer engagement technology solutions that helps drive customer experiences (CX) for brands. The services it provides for clients are digital and traditional omni-channel capabilities. The Company has designed a differentiated suite of digital and operational solutions meant to manage interactions throughout the phases of the customer lifecycle, across multiple channels, customized to a client's specific needs. Its services cover three areas: Digital & Omni-Channel Customer Experience (ibex Connect), Digital Marketing and E-Commerce (ibex Digital), and Digital CX surveys and analytics (ibex CX). The ibex Connect business unit delivers differentiated customer service, technical support, revenue generation and other value-added outsourced back-office services to its clients. The ibex Digital offers digital marketing, e-commerce technology and platform solutions for brands.

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.

Ibex Ltd has a Value Score of 91, which is considered to be undervalued.

Ibex Ltd’s price-earnings ratio is 10.1 compared to the industry median at 47.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Ibex Ltd more attractive for value investors.

Ibex Ltd’s price-to-book ratio is higher than its peers. This could make Ibex Ltd less attractive for value investors when compared to the industry median at 3.23.

You can read more about Ibex Ltd’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 81, which is considered to be undervalued.

Immersion Corporation’s price-earnings ratio is 7.0 compared to the industry median at 47.2. 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 3.23.

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.

Movella Holdings Inc’s Value Grade

Value Grade:

Movella Holdings Inc. is a full-stack provider of integrated sensors, software, and analytics that enable the digitization of movement. The Company powers real-time character movement in digital environments, transforms movement into digital data that provides actionable insights, renders digitized movement to enable the creation of sophisticated animated content, creates new forms of monetizable intellectual property (IP) with biomechanical digital content, and provides spatial movement orientation and positioning data. Its full-stack product portfolio includes differentiated sensor fusion modules, motion capture systems, visualization software, and artificial intelligence (AI) cloud analytics enabled by its technologies. The Company’s sensors and software are used by global motion picture studios, video game publishers, and virtual creators for three-dimensional (3D) character animation, and other applications, such as virtual concerts.

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.

Movella Holdings Inc has a Value Score of 83, which is considered to be undervalued.

Movella Holdings Inc’s price-to-book ratio is higher than its peers. This could make Movella Holdings Inc less attractive for value investors when compared to the industry median at 3.23.

You can read more about Movella 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.

Perion Network Ltd’s Value Grade

Value Grade:

Perion Network Ltd is an Israel-based global technology. The Company delivers the digital advertising. ecosystem, providing brands, agencies and publishers with a holistic ability to identify and reach their customers across all channels with high-impact creative units that are orchestrated by its proprietary Intelligent Hub (iHUB), which offers cross-sell. Perion Network Ltd operates in three main pillars of digital advertising: ad search, social media, and display ,video or CTV. Another aspect of Perion’s technological solutions, is SORT technology. SORT alternative technology is a machine learning model that analyzes millions of data combinations to create cookieless targeting groups consisting of people who think and react to ads like one another.

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.

Perion Network Ltd has a Value Score of 87, which is considered to be undervalued.

Perion Network Ltd’s price-earnings ratio is 5.6 compared to the industry median at 47.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Perion Network Ltd more attractive for value investors.

Perion Network Ltd’s price-to-book ratio is higher than its peers. This could make Perion Network Ltd less attractive for value investors when compared to the industry median at 3.23.

You can read more about Perion Network Ltd’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.

Sharecare Inc’s Value Grade

Value Grade:

Sharecare, Inc. is a digital healthcare company that helps people manage their health in one place. The Company offers virtual health platform, which is designed to help people, patients, providers, employers, health plans, government organizations, and communities to optimize individual and population-wide well-being by driving positive behavior change. The Company offers Sharecare+, a digital advocacy solution designed to deliver value through benefits navigation, clinical engagement, virtual care, and chronic case and utilization management. Its platform offers an accessible, interactive, personalized, and rewarding environment that aims to transform user engagement with their healthcare from episodic to everyday. The platform provides a single destination for people, patients, and caregivers to access and clinically reviewed content; digitally connect with other patients, community members and healthcare professionals, and adopt action plans provided by healthcare professionals.

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.

Sharecare Inc has a Value Score of 80, which is considered to be undervalued.

Sharecare Inc’s price-to-book ratio is higher than its peers. This could make Sharecare Inc less attractive for value investors when compared to the industry median at 3.23.

You can read more about Sharecare 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.

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 7 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.

• CareCloud Inc stock has a Value Grade of A.
• Consensus Cloud Solutions Inc stock has a Value Grade of A.
• Ibex Ltd stock has a Value Grade of A.
• Immersion Corporation stock has a Value Grade of A.
• Movella Holdings Inc stock has a Value Grade of A.
• Perion Network Ltd stock has a Value Grade of A.
• Sharecare Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 7 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.

• 5 Undervalued Software Stocks for Wednesday, May 22
• 7 Undervalued Software Stocks for Tuesday, May 21
• What You Need to Know About Full Truck Alliance Co Ltd - ADR's Q1 Earnings
• Why A10 Networks Inc’s (ATEN) Stock Is Down 8.02%

AAII Disclaimer

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