Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 5 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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5 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 5 undervalued stocks in the IT Services & Consulting 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 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.

ePlus inc’s Value Grade

Value Grade:

ePlus inc. is a provider of technology solutions across the spectrum spanning security, cloud, data center, networking, collaboration, artificial intelligence, and emerging solutions. The Company’s segments include Product, Professional Services, Managed Services, and Financing. The Product segment includes sales of information technology (IT) products, third-party software, and third-party maintenance, software assurance, and other third-party services. The Professional services segment includes its advanced professional services, staff augmentation, project management services, cloud consulting services and security services. The Managed services segment includes its advanced managed services, service desk, storage-as-a-service, cloud hosted services, cloud managed services and managed security services. The Financing segment consists of the financing of IT equipment, software, and related services to commercial enterprises, state and local governments, and government contractors.

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.

ePlus inc has a Value Score of 61, which is considered to be undervalued.

When you look at ePlus inc’s price-to-sales ratio at 0.98 compared to the industry median at 1.75, this company has a lower price relative to revenue compared to its peers. This could make ePlus inc’s stock more attractive for value investors.

ePlus inc’s price-earnings ratio is 16.74 compared to the industry median at 26.78. This means it has a lower share price relative to earnings compared to its peers. This could make ePlus inc more attractive for value investors.

Now, let’s assess ePlus inc’s EV/EBITDA ratio, also known as enterprise multiple. At 10.2, 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. ePlus inc’s shareholder yield is higher than its industry median ratio of (1.23%). 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. ePlus inc’s price-to-book ratio is lower than its industry median ratio of 2.66. This could make ePlus inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at ePlus inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. ePlus inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 23.30. This could make ePlus inc more attractive because the lower P/FCF ratio indicates that ePlus 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.

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 2.66.

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.

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 88, which is considered to be undervalued.

Telus International Cda Inc’s price-earnings ratio is 20.1 compared to the industry median at 26.8. This means that it has a lower price relative to its earnings compared to its peers. This makes Telus International Cda Inc more 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 2.66.

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.

Unisys Corp’s Value Grade

Value Grade:

Unisys Corporation is an information technology (IT) solutions company. It provides its clients with advice and capabilities to architect, develop, modernize, implement and integrate the technologies that helps their organizations. It operates in three segments: Digital Workplace Solutions (DWS), Cloud, Applications & Infrastructure Solutions (CA&I;) and Enterprise Computing Solutions (ECS). The DWS segment provides modern and traditional workplace solutions. The CA&I; segment provides solution in Digital Platforms and Applications or Infrastructure, which includes cloud management, hybrid infrastructure, modern applications, data and AI, and cyber security. The ECS segment delivers proprietary and hybrid compute capabilities in the cloud and on-premises. It classifies its solution as either License and Support or Specialized Services and Next-Gen compute. Its product includes Unisys InteliServe, PowerSuite, Unisys Logistics Optimization, CloudForte, ClearPath Forward and Unisys Stealth.

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.

Unisys Corp has a Value Score of 95, which is considered to be undervalued.

You can read more about Unisys 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.

Exela Technologies Inc’s Value Grade

Value Grade:

Exela Technologies, Inc. is a provider of transaction processing solutions, enterprise information management, document management and digital business process services. Its segments include Information & Transaction Processing Solutions (ITPS), Healthcare Solutions (HS) and Legal & Loss Prevention Services (LLPS). ITPS provides industry-specific solutions for banking and financial services, including lending solutions for mortgages and auto loans, and banking solutions for clearing, anti-money laundering, sanctions, and interbank cross-border settlement; property and casualty insurance solutions for origination enrollments, claims processing, and benefits administration communication, among others. HS offerings include revenue cycle solutions, integrated accounts payable and accounts receivable, and information management for both the healthcare payer and provider markets. LLPS solutions include processing of legal claims for class action and mass action settlement administrations.

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.

Exela Technologies Inc has a Value Score of 64, which is considered to be undervalued.

You can read more about Exela Technologies 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 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 5 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.

• ePlus inc stock has a Value Grade of B.
• System1 Inc stock has a Value Grade of A.
• Telus International Cda Inc stock has a Value Grade of A.
• Unisys Corp stock has a Value Grade of A.
• Exela Technologies Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 5 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.

• 5 Undervalued IT Services & Consulting Stocks for Wednesday, May 22
• 7 Undervalued IT Services & Consulting Stocks for Tuesday, May 21
• Why Backblaze Inc’s (BLZE) Stock Is Down 6.90%
• Why GDS Holdings Ltd - ADR’s (GDS) Stock Is Down 4.62%

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.