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 Thursday, May 23, 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.

AGM Group Holdings Inc’s Value Grade

Value Grade:

AGM Group Holdings Inc is a technology company engaged in global technology hardware supply chain and fintech blockchain ecosystem. The Company’s products and services include: futures trading solution catering to clients using MetaTrader 5; retail-orientated online trading education website; foreign exchange (Forex) trading system that provides services to financial institutions outside of China; technology hardware research and development, manufacture, and sales. The Company operates its businesses in both the United Stated and global markets.

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.

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

When you look at AGM Group Holdings Inc’s price-to-sales ratio at 0.17 compared to the industry median at 3.70, this company has a lower price relative to revenue compared to its peers. This could make AGM Group Holdings Inc’s stock more attractive for value investors.

AGM Group Holdings Inc’s price-earnings ratio is 2.52 compared to the industry median at 47.05. This means it has a lower share price relative to earnings compared to its peers. This could make AGM Group Holdings Inc more attractive for value investors.

Now, let’s assess AGM Group Holdings Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 2.1, 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. AGM Group Holdings Inc’s shareholder yield is lower than its industry median ratio of (2.47%). 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. AGM Group Holdings Inc’s price-to-book ratio is lower than its industry median ratio of 3.25. This could make AGM Group Holdings Inc more attractive to investors looking for a new addition to their portfolio.

Cheetah Mobile Inc (ADR)’s Value Grade

Value Grade:

Cheetah Mobile Inc. is a holding company. The Company and its consolidated subsidiaries, variable interest entities (VIEs) and a VIE's subsidiary are engaged in the provision of online marketing services, Internet value-added services, and Internet security services and others. The Company operates a platform that offers mobile and personal computer (PC) applications for its users and global content promotional channels for its customers, both of which are powered by its cloud-based data analytics engines. For its users, its diversified suite of applications optimizes mobile and PC Internet system performance, and provides real time protection against known and unknown security threats. Its data analytics engines perform real time analysis of mobile applications, program files and Websites on their devices for behavior that may impair system performance or impose security risks.

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.

Cheetah Mobile Inc (ADR) has a Value Score of 86, which is considered to be undervalued.

Cheetah Mobile Inc (ADR)’s price-to-book ratio is higher than its peers. This could make Cheetah Mobile Inc (ADR) less attractive for value investors when compared to the industry median at 3.25.

You can read more about Cheetah Mobile 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.

GDEV Inc.’s Value Grade

Value Grade:

GDEV Inc. is a British Virgin Islands-based gaming and entertainment company. The Company is focused on growing and enhancing its portfolio of studios with a diverse range of subsidiaries, including Nexters, Cubic Games, Dragon Machines, and more. The Company owns a portfolio of franchises, such as Hero Wars, Island Questaway, Pixel Gun 3D, Throne Rush and others. The Company operates through two segments: Nexters Global Ltd, and MX Capital Ltd. Nexters Global Ltd, and MX Capital Ltd are engaged in game development and publishing activities. Its Hero Wars game includes defeating hydras with the guild on a mobile and completing co-op adventures with the help of pets on the Web. The Company’s Throne Rush game is a strategy game that allows players to rule their own kingdoms and achieve prosperity while destroying enemies and capturing their wealth.

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.

GDEV Inc. has a Value Score of 68, which is considered to be undervalued.

GDEV Inc.’s price-earnings ratio is 9.4 compared to the industry median at 47.0. This means that it has a lower price relative to its earnings compared to its peers. This makes GDEV Inc. more attractive for value investors.

You can read more about GDEV 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.

Cue Health Inc’s Value Grade

Value Grade:

Cue Health Inc. is a healthcare technology company. The Company is engaged in providing individuals with a connected diagnostic platform that bridges the physical and virtual care continuum. Its platform, Cue Integrated Care Platform, which consists of hardware, software and diagnostic components: the Cue Health Monitoring System, which is made up of a portable, durable and reusable reader, or Cue Reader, a single-use test cartridge, or Cue Cartridge, and a sample collection wand, or Cue Wand; Cue Data and Innovation Layer, with cloud-based data and analytics capability; Cue Virtual Care Delivery Apps, including its app and Cue Enterprise Dashboard, and its Cue Ecosystem Integrations and apps, which allow for integrations with third party applications and sensors. Its products include Cue Reader, COVID-19 Test, Cue Test Kits, Cue Care, and Cue+ Membership. It offers solutions for home/personal, business, public sector, healthcare, retail pharmacies, entertainment and education sectors.

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.

Cue Health Inc has a Value Score of 96, which is considered to be undervalued.

Cue Health Inc’s price-to-book ratio is higher than its peers. This could make Cue Health Inc less attractive for value investors when compared to the industry median at 3.25.

You can read more about Cue Health 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.

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 3.25.

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.

Smith Micro Software Inc’s Value Grade

Value Grade:

Smith Micro Software, Inc. develops software to simplify and enhance the mobile experience, providing solutions to wireless service providers around the world. It operates through the Wireless segment. From enabling the family digital lifestyle to providing voice messaging capabilities, its solutions enhance connected lifestyles while creating new opportunities to engage consumers via smartphones and consumer Internet of Things (IoT) devices. Its portfolio also includes a range of products for creating, sharing, and monetizing content, such as visual voice messaging, optimizing retail content display and performing analytics on any product set. Its products include SafePath, ViewSpot, and CommSuite. SafePath consists of SafePath Family, SafePath IoT, SafePath Home, and SafePath Premium. The SafePath product suite provides tools to protect family digital lifestyles and manage connected devices both inside and outside the home. ViewSpot is its retail display management 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.

Smith Micro Software Inc has a Value Score of 64, which is considered to be undervalued.

Smith Micro Software Inc’s price-to-book ratio is higher than its peers. This could make Smith Micro Software Inc less attractive for value investors when compared to the industry median at 3.25.

You can read more about Smith Micro Software 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.

Uphealth Inc’s Value Grade

Value Grade:

UpHealth, Inc. is a healthcare technology and technology-enabled service company. The Company operates through three segments: Integrated Care Management, Virtual Care Infrastructure, and Services. The Integrated Care Management segment provides guidance and tools to enhance population health through its SyntraNet platform. This platform improves overall health system performance by leveraging capabilities in data and analytics, health information exchanges, pharmacy care services, health care operations, and population health. The Virtual Care Management leverages digital health tools, technology, data, and analytics to provide telehealth solutions, which use electronic information and telecommunications technologies to support and promote long-distance clinical health care, patient and professional health-related education, and virtual care infrastructure solutions. The Services platform provides behavioral health, mental health, and pharmacy services in the United States.

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.

Uphealth Inc has a Value Score of 76, which is considered to be undervalued.

Uphealth Inc’s price-to-book ratio is higher than its peers. This could make Uphealth Inc less attractive for value investors when compared to the industry median at 3.25.

You can read more about Uphealth 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.

• AGM Group Holdings Inc stock has a Value Grade of A.
• Cheetah Mobile Inc (ADR) stock has a Value Grade of A.
• GDEV Inc. stock has a Value Grade of B.
• Cue Health Inc stock has a Value Grade of A.
• Sharecare Inc stock has a Value Grade of B.
• Smith Micro Software Inc stock has a Value Grade of B.
• Uphealth 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.

• 7 Undervalued Software Stocks for Thursday, May 23
• 5 Undervalued Software Stocks for Wednesday, May 22
• What You Need to Know About Walkme Ltd's Q1 Earnings
• Why Applovin Corp’s (APP) Stock Is Down 4.76%

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.