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 Wednesday, July 03, 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 78, which is considered to be undervalued.

When you look at AGM Group Holdings Inc’s price-to-sales ratio at 0.13 compared to the industry median at 3.64, 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.

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 (2.32%). 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 3.20. This could make AGM Group Holdings Inc more attractive to investors looking for a new addition to their portfolio.

Immersion Corporation’s Value Grade

Value Grade:

Immersion Corporation is a developer and provider of technologies for haptics. The Company develops, licenses, and supports a range of software and intellectual property (IP) that fully engage users senses of touch when operating digital devices. The Company offers licenses to its patented technology to its customers and offers its customers enabling software, related tools and technical assistance designed to integrate the Company's patented technology into its customers products or enhance the functionality of its patented technology. The Company's licenses enable its customers to deploy haptically enabled devices, content and other offerings, which they typically sell under their own brand names. It is focused on various target application areas, such as mobile devices, wearables, consumer, mobile entertainment and other content; virtual and augmented reality; console gaming; automotive; medical, and residential, commercial, and industrial Internet of Things.

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.

Immersion Corporation has a Value Score of 80, which is considered to be undervalued.

Immersion Corporation’s price-earnings ratio is 6.9 compared to the industry median at 46.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Immersion Corporation more attractive for value investors.

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

You can read more about Immersion Corporation’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 91, 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 3.20.

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.

VIQ Solutions Inc’s Value Grade

Value Grade:

VIQ Solutions Inc. is a Canada-based global provider of secure, artificial intelligence (AI)-driven, digital voice and video capture technology and transcription services. The Company's modular software allows customers to integrate the platform at any stage of their organization's digitization, from the capture of digital content from video and audio devices through to online collaboration, mobility, data analytics, and integration with sensors, facial recognition, speech recognition and case management or patient record systems. It provides services to various industries, such as courts, law firms, law enforcement, insurance, government, corporate and finance, media broadcasting and transcription companies. The Company's solutions include CapturePro, CapturePro Mobile, MobileMic Pro, NetScribe, aiAssist, FirstDraft, Carbon, Lexel and AccessPoint. Its CapturePro solution captures, manages and shares official court records, police interrogations or insurance investigations.

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.

VIQ Solutions Inc has a Value Score of 62, which is considered to be undervalued.

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

You can read more about VIQ Solutions 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.

• AGM Group Holdings Inc stock has a Value Grade of B.
• Immersion Corporation stock has a Value Grade of B.
• Ryvyl Inc stock has a Value Grade of A.
• VIQ Solutions 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 Wednesday, July 03
• 6 Undervalued Software Stocks for Tuesday, July 02
• Which Is a Better Investment, Cellebrite DI Ltd or EverCommerce Inc Stock?
• Which Is a Better Investment, EverCommerce Inc or Twilio Inc Stock?

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.