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 Online Services 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 Online Services 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 Online Services 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 Online Services industry for Wednesday, June 19, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Online Services 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.

Angi Inc’s Value Grade

Value Grade:

Angi Inc. connects home service professionals with consumers across approximately 500 different categories, from repairing and remodeling homes to cleaning and landscaping. The Company’s segments include Ads and Leads, Services, Roofing, and International (includes Europe and Canada), and operates under multiple brands including Angi, HomeAdvisor, and Handy. Ads and Leads segment provides service professionals the capability to engage with potential customers, including quoting and invoicing services, and provides consumers with tools and resources to help them find local, pre-screened and customer-rated service professionals nationwide for home repair. Services segment provides a pre-priced offering service, pursuant to which consumers can request services through Angi and Handy branded platforms. Roofing segment provides roof replacement and repair services, primarily in Florida. International segment operates international businesses, such as Travaux, MyHammer and Werkspot.

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.

Angi Inc has a Value Score of 61, which is considered to be undervalued.

When you look at Angi Inc’s price-to-sales ratio at 0.73 compared to the industry median at 1.29, this company has a lower price relative to revenue compared to its peers. This could make Angi Inc’s stock more attractive for value investors.

Now, let’s assess Angi Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 17.3, when compared to the industry median of 13.8, the company may be considered overvalued 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. Angi 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. Angi Inc’s price-to-book ratio is lower than its industry median ratio of 2.17. This could make Angi Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Angi Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Angi Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 24.87. This could make Angi Inc more attractive because the lower P/FCF ratio indicates that Angi 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.

Alibaba Group Holding Ltd - ADR’s Value Grade

Value Grade:

Alibaba Group Holding Ltd provides technology infrastructure and marketing platforms. The Company operates through seven segments. China Commerce segment includes China retail commerce businesses such as Taobao, Tmall and Freshippo, among others, and wholesale business. International Commerce segment includes international retail and wholesale commerce businesses such as Lazada and AliExpress. Local Consumer Services segment includes location-based businesses such as Ele.me, Amap, Fliggy and others. Cainiao segment includes domestic and international one-stop-shop logistics services and supply chain management solutions. Cloud segment provides public and hybrid cloud services like Alibaba Cloud and DingTalk for domestic and foreign enterprises. Digital Media and Entertainment segment includes Youku, Quark and Alibaba Pictures, other content and distribution platforms and online games business. Innovation Initiatives and Others segment include Damo Academy, Tmall Genie and others.

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.

Alibaba Group Holding Ltd - ADR has a Value Score of 79, which is considered to be undervalued.

Alibaba Group Holding Ltd - ADR’s price-earnings ratio is 17.4 compared to the industry median at 27.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Alibaba Group Holding Ltd - ADR more attractive for value investors.

Alibaba Group Holding Ltd - ADR’s price-to-book ratio is higher than its peers. This could make Alibaba Group Holding Ltd - ADR less attractive for value investors when compared to the industry median at 2.17.

You can read more about Alibaba Group Holding 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.

Dada Nexus Ltd - ADR’s Value Grade

Value Grade:

Dada Nexus Ltd is a China-based holding company principally involved in the operation of local on-demand retail and delivery platforms. The Company’s main platforms are JD-Daojia (JDDJ) and Dada Now. JDDJ is an on-demand retail platform operated in China. It facilitates digitalized transformation for retailers and brand owners on selling products through online channels. Dada Now is a China-based on-demand delivery platform using a crowdsourcing model to process on-demand delivery orders. The two platforms combined can deliver a range of products, including the goods from supermarkets and convenience stores, fresh fruits and vegetables and drugs, to the customers.

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.

Dada Nexus Ltd - ADR has a Value Score of 83, which is considered to be undervalued.

Dada Nexus Ltd - ADR’s price-to-book ratio is higher than its peers. This could make Dada Nexus Ltd - ADR less attractive for value investors when compared to the industry median at 2.17.

You can read more about Dada Nexus 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.

HUYA Inc - ADR’s Value Grade

Value Grade:

HUYA Inc is a China-based holding company principally engaged in the operation of game live streaming platforms. The Company cooperates with e-sports event organizers, game developers and publishers to develop e-sports live streaming. Its game contents include gameplay, e-sports tournament events and other e-sports game shows. The Company also offers non-game entertainment content, such as talent shows, anime and outdoor activities. The Company’s platforms include its Huya Live mobile application (app), website www.huya.com, and personal computer (PC) clients. It also develops and operates certain mobile games jointly with third-party distribution platforms, and game-related apps. The Company has also created an interactive online community in which a range of functions are provided for the users, including bullet chatting, real-time commenting and gifting. The Company conducts its businesses in domestic market.

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.

HUYA Inc - ADR has a Value Score of 90, which is considered to be undervalued.

HUYA Inc - ADR’s price-to-book ratio is higher than its peers. This could make HUYA Inc - ADR less attractive for value investors when compared to the industry median at 2.17.

You can read more about HUYA 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.

IZEA Worldwide Inc’s Value Grade

Value Grade:

IZEA Worldwide, Inc. is a marketing technology company providing software and professional services that enable brands to collaborate and transact with the full spectrum of social influencers and content creators. The Company partners with marketers to facilitate influencer marketing campaigns. It assists brands in generating more custom generated content (CGC) through dedicated programs aimed at boosting online visibility and driving sales. It collaborates with marketers to supplement or replace their content development initiatives on their Website, social media, and other channels. Its primary software platforms include IZEA Flex and IZEA.com. Each of these platforms is designed to facilitate specific aspects of collaborations between creators and brands. IZEA Flex is its flagship platform for enterprise influencer marketing. IZEA.com provides creators with tools to present their work to marketers (Listings). Zuberance by IZEA is an advocate marketing solutions provider.

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.

IZEA Worldwide Inc has a Value Score of 99, which is considered to be undervalued.

IZEA Worldwide Inc’s price-to-book ratio is higher than its peers. This could make IZEA Worldwide Inc less attractive for value investors when compared to the industry median at 2.17.

You can read more about IZEA Worldwide 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.

Sohu.com Ltd - ADR’s Value Grade

Value Grade:

Sohu.com Ltd is a China-based company mainly engaged in brand advertising business and online game business. The Company primarily operates through two segments. The Sohu segment is mainly engaged in the brand advertising business. The Changyou segment is mainly engaged in the operation of Changyou online game business and the 17173.com Website. The Company primarily operates in the domestic market.

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.

Sohu.com Ltd - ADR has a Value Score of 95, which is considered to be undervalued.

Sohu.com Ltd - ADR’s price-to-book ratio is higher than its peers. This could make Sohu.com Ltd - ADR less attractive for value investors when compared to the industry median at 2.17.

You can read more about Sohu.com 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.

JOYY Inc (ADR)’s Value Grade

Value Grade:

JOYY Inc. is a global technology company. The Company operates several social products, including Bigo Live for live streaming, Likee for short-form videos, Hago for multiplayer social networking, an instant messaging product, and others. The Company operates through two segments: BIGO and All other. The BIGO segment primarily consists of several social entertainment platforms, including Bigo Live, Likee, imo, and others. The All other segment primarily consist of Hago, Shopline, and certain audio live streaming platforms. Bigo Live enables its users to share their life moments, showcase their talents, socialize, and connect with other users. Likee enables users to easily discover, create and share short-form videos, with all-in-one video creation tools, such as filters and special effects, and AI-backed personalized feed. Hago provides casual games, integrating social features, such as audio and video multiuser chatrooms and 3D virtual interactive party games.

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.

JOYY Inc (ADR) has a Value Score of 91, which is considered to be undervalued.

JOYY Inc (ADR)’s price-earnings ratio is 5.6 compared to the industry median at 27.6. This means that it has a lower price relative to its earnings compared to its peers. This makes JOYY Inc (ADR) more attractive for value investors.

JOYY Inc (ADR)’s price-to-book ratio is higher than its peers. This could make JOYY Inc (ADR) less attractive for value investors when compared to the industry median at 2.17.

You can read more about JOYY 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.

Other Online Services 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 Online Services stocks as well as other industrys.

Choosing Which of the 7 Best Online Services 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.

• Angi Inc stock has a Value Grade of B.
• Alibaba Group Holding Ltd - ADR stock has a Value Grade of B.
• Dada Nexus Ltd - ADR stock has a Value Grade of A.
• HUYA Inc - ADR stock has a Value Grade of A.
• IZEA Worldwide Inc stock has a Value Grade of A.
• Sohu.com Ltd - ADR stock has a Value Grade of A.
• JOYY Inc (ADR) stock has a Value Grade of A.

Now that you have a bit more background about each of the 7 undervalued stocks in the Online Services 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 Online Services Stocks

Want to learn more about Online Services 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 Online Services Stocks for Wednesday, June 19
• 4 Undervalued Online Services Stocks for Tuesday, June 18
• Why Bumble Inc’s (BMBL) Stock Is Down 5.08%
• Why Jumia Technologies AG - ADR’s (JMIA) Stock Is Down 16.58%

AAII Disclaimer

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