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 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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5 Undervalued Software 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 Software industry for Friday, May 24, 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.

Leopard Energy Inc’s Value Grade

Value Grade:

Cyber Apps World Inc. is focused on the development of mobile applications. The Company allows users around the world to save money on products and services from member merchants and suppliers instantly with mobile coupons, using their desktops and/or mobile devices, including smartphones. The Company is developing a delivery computer application known as Friendly and Fast. The application is being designed to allow users to order food, groceries, and other courier services. Friendly and Fast's is focused on delivering goods. Friendly and Fast targets both individual and corporate customer segments.

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.

Leopard Energy Inc has a Value Score of 90, which is considered to be undervalued.

Now, let’s assess Leopard Energy Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 2.9, 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. Leopard Energy Inc’s shareholder yield is higher than its industry median ratio of (2.48%). 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. Leopard Energy Inc’s price-to-book ratio is higher than its industry median ratio of 3.25. This could make Leopard Energy Inc less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Leopard Energy Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Leopard Energy Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 29.49. This could make Leopard Energy Inc more attractive because the lower P/FCF ratio indicates that Leopard Energy 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.

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 90, which is considered to be undervalued.

Ibex Ltd’s price-earnings ratio is 10.1 compared to the industry median at 46.3. 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 3.25.

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.

iSpecimen Inc’s Value Grade

Value Grade:

iSpecimen Inc. is a technology-driven company. The Company's iSpecimen Marketplace platform is designed to transform the biospecimen procurement process to accelerate medical discovery. The Company's technology consolidates the biospecimen buying experience in a single, online marketplace that brings together healthcare providers who have biospecimens and researchers across industry, academia, and government institutions who need them. Its iSpecimen Marketplace platform has compiled de-identified healthcare data provided by its healthcare supply partners. The platform is built upon a robust healthcare data set comprised of information about available specimens and research subjects. The Company’s platform helps with administrative and reporting functions for researchers, suppliers, and its internal personnel, including user and compliance management. The iSpecimen Marketplace technology comprises four functional areas: search, workflow, data, administrative, compliance and reporting.

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.

iSpecimen Inc has a Value Score of 88, which is considered to be undervalued.

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

You can read more about iSpecimen 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.

Katapult Holdings Inc’s Value Grade

Value Grade:

Katapult Holdings, Inc. is a technology driven lease-to-own (LTO) platform that integrates with omni-channel retailers and e-commerce platforms to power the purchasing of everyday durable goods for underserved United States non-prime consumers. The Company primarily operates within the virtual LTO market. Its LTO platform offers customers an alternative to traditional financing of automotive goods, computers, electronics, home furnishings and other durable goods. By using its integrated LTO solution or Katapult Pay (its virtual card technology), customers who may be unable to access traditional financing can use its product to shop directly with more than 200 merchant partners. Customers can also choose to shop directly with different merchants in the Katapult marketplace within its mobile app. The Company's platform can be integrated regardless of integration method: platform plug-in, developer documentation, direct application programming interface and waterfall partnerships.

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.

Katapult Holdings Inc has a Value Score of 81, which is considered to be undervalued.

You can read more about Katapult 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.

Ryvyl Inc’s Value Grade

Value Grade:

RYVYL Inc. is a financial technology company that develops, markets, and sells blockchain-based payment solutions. Its core focus is to develop and monetize disruptive blockchain- based applications, integrated within an end-to-end suite of financial products, capable of supporting a multitude of industries. Its blockchain-based systems are designed to facilitate, record and store a virtually limitless volume of tokenized assets, representing cash or data, on a secured, immutable blockchain-based ledger. Its products include QuickCard Payment System, Coyni Platform, and ChargeSavvy. QuickCard Payment System is a physical and virtual payment card processing management system, including software that facilitates on and off ramp e-wallet management. The Coyni Platform offers custodial assurance by utilizing its stablecoin and blockchain technology in a closed-loop ecosystem. ChargeSavvy is its POS solution, comprising both software and hardware for the restaurant and hospitality industry.

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.

Ryvyl Inc has a Value Score of 92, which is considered to be undervalued.

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

You can read more about Ryvyl 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 5 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.

• Leopard Energy Inc stock has a Value Grade of A.
• Ibex Ltd stock has a Value Grade of A.
• iSpecimen Inc stock has a Value Grade of A.
• Katapult Holdings Inc stock has a Value Grade of A.
• Ryvyl Inc stock has a Value Grade of A.

Now that you have a bit more background about each of the 5 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 Friday, May 24
• 7 Undervalued Software Stocks for Thursday, May 23
• What You Need to Know About Cellebrite DI Ltd's Q1 Earnings
• What You Need to Know About Domo Inc's Q1 Earnings

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.