Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 6 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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6 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 6 undervalued stocks in the IT Services & Consulting industry for Wednesday, June 05, 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.

Alithya Group inc’s Value Grade

Value Grade:

Alithya Group inc. is a Canada-based company, which advises on strategy and digital transformation with professionals in Canada, the United States and internationally. It offers consulting and digital technology services to clients in the financial services, insurance, healthcare, government, renewable energy, manufacturing, telecommunications, transportation and logistics, and professional services sectors. Its segments include business strategy, business applications implementation, application services, data and analytics and digital skilling and change enablement. Business Strategy segment helps in decision-making processes regarding strategic consulting, digital transformation, business agility, enterprise architecture, organizational performance and others. Business Applications Implementation segment helps clients deploy company-wide systems, including enterprise resource planning, enterprise performance management, customer relationship management and human capital management.

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.

Alithya Group inc has a Value Score of 69, which is considered to be undervalued.

When you look at Alithya Group inc’s price-to-sales ratio at 0.28 compared to the industry median at 1.57, this company has a lower price relative to revenue compared to its peers. This could make Alithya Group inc’s stock more attractive for value investors.

Now, let’s assess Alithya Group inc’s EV/EBITDA ratio, also known as enterprise multiple. At 11.4, when compared to the industry median of 15.0, 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. Alithya Group inc’s shareholder yield is higher than its industry median ratio of (1.57%). 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. Alithya Group inc’s price-to-book ratio is lower than its industry median ratio of 2.46. This could make Alithya Group inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Alithya Group inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Alithya Group inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 22.36. This could make Alithya Group inc more attractive because the lower P/FCF ratio indicates that Alithya Group 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.

Cheer Holding Inc’s Value Grade

Value Grade:

Cheer Holding Inc, formerly Glory Star New Media Group Holdings Ltd, is a China-based company mainly engaged in the provision of next-generation mobile internet infrastructure and platform services. The Company is dedicated to building a digital ecosystem that integrates platforms, applications, technology, and industry into a cohesive system, thereby creating a new, open business environment for web3.0 that leverages artificial intelligence (AI) technology. The Company's portfolio includes a wide range of products and services, such as Polaris Intelligent Cloud, CHEERS Telepathy, CHEERS Open Platform, CHEERS Video, CHEERS e-Mall, CheerReal, CheerCar, CheerChat, CHEERS Fresh Group-Buying E-commerce Platform, Digital Innovation Research Institute, CHEERS Livestreaming, variety show series, IP short video matrix and more.

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.

Cheer Holding Inc has a Value Score of 95, which is considered to be undervalued.

Cheer Holding Inc’s price-earnings ratio is 0.8 compared to the industry median at 25.7. This means that it has a lower price relative to its earnings compared to its peers. This makes Cheer Holding Inc more attractive for value investors.

Cheer Holding Inc’s price-to-book ratio is higher than its peers. This could make Cheer Holding Inc less attractive for value investors when compared to the industry median at 2.46.

You can read more about Cheer Holding 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.

Conduent Inc’s Value Grade

Value Grade:

Conduent Incorporated is a technology-led business process solutions company. The Company operates through three segments: Commercial, Government, and Transportation. The Commercial segment provides business process services and customized solutions to clients in a variety of commercial industries. Its solutions and services include Customer Experience Management (CXM), Business Operations Solutions (BOS), Healthcare Claims and Administration Solutions and Human Capital Solutions. The Government segment include government healthcare solutions and government service solutions. Its Government Healthcare Solutions provide mission-critical program administration solutions for government healthcare programs with a range of solutions such as Medicaid management, provider services, and Medicaid business intelligence. The Transportation segment includes road usage charging and management solutions and transit solutions.

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.

Conduent Inc has a Value Score of 78, which is considered to be undervalued.

Conduent Inc’s price-to-book ratio is higher than its peers. This could make Conduent Inc less attractive for value investors when compared to the industry median at 2.46.

You can read more about Conduent 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.

Formula Systems 1985 Ltd (ADR)’s Value Grade

Value Grade:

Formula Systems (1985) Ltd. (Formula) is a global information technology (IT) solutions and services holding company. The Company, through its directly held subsidiary and affiliated companies, is engaged in providing software solutions and services, software product marketing and support, computer infrastructure and integration solutions, and learning and integration. The Company operates through two segments: software services and IT professional services. The software services segment develops markets, sells and supports an application platform, software applications, business and process integration solutions, and related services. The IT professional services segment offers IT services in the areas of infrastructure design and delivery, application development, technology planning and implementation services, communications services and solutions, as well as supplemental outsourcing 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.

Formula Systems 1985 Ltd (ADR) has a Value Score of 65, which is considered to be undervalued.

Formula Systems 1985 Ltd (ADR)’s price-earnings ratio is 18.7 compared to the industry median at 25.7. This means that it has a lower price relative to its earnings compared to its peers. This makes Formula Systems 1985 Ltd (ADR) more attractive for value investors.

Formula Systems 1985 Ltd (ADR)’s price-to-book ratio is higher than its peers. This could make Formula Systems 1985 Ltd (ADR) less attractive for value investors when compared to the industry median at 2.46.

You can read more about Formula Systems 1985 Ltd (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.

Steel Connect Inc’s Value Grade

Value Grade:

Steel Connect, Inc. is a holding company which operates through its subsidiary, ModusLink Corporation. The Company is an end-to-end global supply chain solutions and e-commerce provider serving clients in markets such as consumer electronics, communications, computing, medical devices, software and retail. The Company designs and executes various elements in its clients global supply chains. The Company delivers its solutions through a combination of industry expertise, service solutions, integrated operations, business processes, a wide global footprint and technology. It produces and licenses an entitlement management solution powered by its enterprise-class Poetic software, which offers a complete solution for activation, provisioning, entitlement subscription, and data collection from physical goods (connected products) and digital products. It has an integrated network of facilities located in various countries, including numerous sites throughout North America, Europe and Asia.

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.

Steel Connect Inc has a Value Score of 84, which is considered to be undervalued.

Steel Connect Inc’s price-earnings ratio is 10.5 compared to the industry median at 25.7. This means that it has a lower price relative to its earnings compared to its peers. This makes Steel Connect Inc more attractive for value investors.

Steel Connect Inc’s price-to-book ratio is higher than its peers. This could make Steel Connect Inc less attractive for value investors when compared to the industry median at 2.46.

You can read more about Steel Connect 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 89, which is considered to be undervalued.

Telus International Cda Inc’s price-earnings ratio is 18.2 compared to the industry median at 25.7. 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 2.46.

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.

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 6 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.

• Alithya Group inc stock has a Value Grade of B.
• Cheer Holding Inc stock has a Value Grade of A.
• Conduent Inc stock has a Value Grade of B.
• Formula Systems 1985 Ltd (ADR) stock has a Value Grade of B.
• Steel Connect Inc stock has a Value Grade of A.
• Telus International Cda Inc stock has a Value Grade of A.

Now that you have a bit more background about each of the 6 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.

• 6 Undervalued IT Services & Consulting Stocks for Wednesday, June 05
• 3 Undervalued IT Services & Consulting Stocks for Tuesday, June 04
• What You Need to Know About Crowdstrike Holdings Inc's Q1 Earnings
• What You Need to Know About Verint Systems 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.