Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 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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4 Undervalued Software Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the Software industry for Thursday, June 20, 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.

Agora Inc (ADR)’s Value Grade

Value Grade:

Agora Inc is a company engaged in providing real-time engagement services on video, voice and messaging. The Company operates a real-time engagement platform-as-a-service (RTE-PaaS) to provide the software and infrastructure required to enable real-time engagement. The Company's products include Real-Time Video, Real-Time Voice, Real-Time Messaging, Real-Time Recording and so on. The products and services are applied in social, gaming, retail, education and other areas. The Company operates its businesses in China, the United States and other countries in Asia Pacific region.

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.

Agora Inc (ADR) has a Value Score of 95, which is considered to be undervalued.

When you look at Agora Inc (ADR)’s price-to-sales ratio at 1.58 compared to the industry median at 3.48, this company has a lower price relative to revenue compared to its peers. This could make Agora Inc (ADR)’s stock more attractive for value investors.

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. Agora Inc (ADR)’s shareholder yield is higher than its industry median ratio of (2.53%). 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. Agora Inc (ADR)’s price-to-book ratio is lower than its industry median ratio of 3.20. This could make Agora Inc (ADR) more attractive to investors looking for a new addition to their portfolio.

BYND Cannasoft Enterprises Inc’s Value Grade

Value Grade:

BYND Cannasoft Enterprises Inc. is an integrated software and cannabis company. The Company is a software house that develops enterprise software tools that enable manufacturing and service companies to optimize their workforce management, customer service, and asset management. The Company develops and markets customer relationship management (CRM) software products that enable small and medium-sized enterprises (SMEs) to optimize day-to-day functions, such as sales management, personnel management, marketing, call center activities and asset management. The Company is focused on the development of a CRM platform, which is designed to serve the needs of the medical cannabis industry. The Company is also focused on the cannabis farm and selling medical cannabis. The Company's wholly owned subsidiaries are BYND-Beyond Solutions Ltd, Zigi Carmel Initiatives and Investments Ltd., and B.Y.B.Y. Investment and Promotions Ltd.

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.

BYND Cannasoft Enterprises Inc has a Value Score of 84, which is considered to be undervalued.

BYND Cannasoft Enterprises Inc’s price-to-book ratio is higher than its peers. This could make BYND Cannasoft Enterprises Inc less attractive for value investors when compared to the industry median at 3.20.

You can read more about BYND Cannasoft Enterprises 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.

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 83, 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 3.20.

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.

PLAYSTUDIOS Inc’s Value Grade

Value Grade:

PLAYSTUDIOS, Inc. is a developer of free-to-play casual games for mobile and social platforms. The Company's game portfolio includes a diverse range of titles, from social casino and card games to puzzle and adventure games. It operates in two segments: playGAMES and playAWARDS. playGAMES segment is a developer and publisher of digital games on mobile and Web platforms. The Company operates primarily in the social gaming market, which is characterized by gameplay online or on mobile devices, that is social, competitive, and self-directed in pace and session length. playGAMES also operate in the casual space. playAWARDS segment consists of all of its loyalty assets globally in which it is engaged in developing an end-to-end loyalty solution to help clients reward, enrich, motivate and retain customers, including program design, points management and administration, and broad-based fulfillment and redemption across multiple channels.

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.

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

PLAYSTUDIOS Inc’s price-to-book ratio is higher than its peers. This could make PLAYSTUDIOS Inc less attractive for value investors when compared to the industry median at 3.20.

You can read more about PLAYSTUDIOS 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 4 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.

• Agora Inc (ADR) stock has a Value Grade of A.
• BYND Cannasoft Enterprises Inc stock has a Value Grade of A.
• iSpecimen Inc stock has a Value Grade of A.
• PLAYSTUDIOS Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 4 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.

• 4 Undervalued Software Stocks for Thursday, June 20
• 3 Undervalued Software Stocks for Wednesday, June 19
• 6 Undervalued Software Stocks for Tuesday, June 18
• Why Bigcommerce Holdings Inc’s (BIGC) Stock Is Down 5.35%

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.