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 Monday, July 08, 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.

Brightcove Inc’s Value Grade

Value Grade:

Brightcove Inc. is a cloud-based streaming technology and services company. The Company's software platform and suite of solutions include offerings that meet the needs of media and enterprise customers in a variety of industries across the globe with their use of streaming video. Its solutions and products include Brightcove Marketing Studio, Brightcove Communications Studio, Brightcove Media Studio, Brightcove Audience Insights, Zencode, and Brightcove Beacon. Brightcove Communications Studio is for marketers and corporate communications professionals who need tools to deliver information in an engaging, secure, and scalable manner through live and on-demand content. Brightcove Media Studio is a comprehensive solution for over-the-top video services, media publishers and broadcasters looking to monetize their media, live stream at scale and nurture their audience lifecycle. Brightcove Audience Insights is a customer data platform specifically designed for video streaming businesses.

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.

Brightcove Inc has a Value Score of 71, which is considered to be undervalued.

When you look at Brightcove Inc’s price-to-sales ratio at 0.53 compared to the industry median at 1.41, this company has a lower price relative to revenue compared to its peers. This could make Brightcove Inc’s stock more attractive for value investors.

Now, let’s assess Brightcove Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 9.2, when compared to the industry median of 14.2, 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. Brightcove Inc’s shareholder yield is lower than its industry median ratio of (1.15%). 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. Brightcove Inc’s price-to-book ratio is lower than its industry median ratio of 1.97. This could make Brightcove Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Brightcove Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Brightcove Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 24.45. This could make Brightcove Inc more attractive because the lower P/FCF ratio indicates that Brightcove 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.

Bumble Inc’s Value Grade

Value Grade:

Bumble Inc. is providing online dating and social networking applications through subscription and in-app purchases of products servicing North America, Europe and various other countries around the world. The Company provides these services through websites and applications that it owns and operates. It operates five apps: Bumble app, Bumble For Friends app, Badoo app, Fruitz app and Official app. On Bumble app, users can input information about themselves and set up a profile, which can be customized in many ways, such as by adding a Badge to prominently display certain values or characteristics. On Badoo app, users profiles can be customized in many ways, such as by using the Moods feature to share what's on their minds. In addition to dating, in Bumble app it also provides products that enable social connection, offering users the opportunity to develop platonic connections through the BFF mode for friendships and through the Bizz mode for professional networking and mentorship.

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.

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

Bumble Inc’s price-earnings ratio is 25.9 compared to the industry median at 25.9. This means that it has a higher price relative to its earnings compared to its peers. This makes Bumble Inc fairly attractive for value investors.

Bumble Inc’s price-to-book ratio is higher than its peers. This could make Bumble Inc less attractive for value investors when compared to the industry median at 1.97.

You can read more about Bumble 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.

CISO Global Inc’s Value Grade

Value Grade:

CISO Global, Inc. is a cybersecurity and compliance company. The Company provides a full range of cybersecurity consulting and related services, encompassing compliance, cybersecurity, and culture. It offers two types of services to clients, including security managed services and professional services. The Company's services include compliance services, secured managed services, security operations center (SOC) services, virtual Chief Information Security Officer (vCISO) services, incident response, certified forensics, technical assessments, and cybersecurity training. Its compliance practice ensures the customers are implementing the right controls, prioritizing risks, and investing in the remediation to comply and adhere to applicable industry standards and guidelines. Its SOC provides 24x7 threat monitoring, alerting, validation, and proactive threat hunting. It provides security testing services, including penetration testing, attack simulation exercises, and training programs.

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.

CISO Global Inc has a Value Score of 74, which is considered to be undervalued.

CISO Global Inc’s price-to-book ratio is higher than its peers. This could make CISO Global Inc less attractive for value investors when compared to the industry median at 1.97.

You can read more about CISO Global 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.

Enthusiast Gaming Holdings Inc’s Value Grade

Value Grade:

Enthusiast Gaming Holdings Inc. is a Canada-based gaming media and entertainment company. The Company’s principal business activities are comprised of media and content, entertainment and esports. The Company’s digital media platform includes video gaming related websites, YouTube channels and a library of casual games. The Company’s esports division, Luminosity Gaming Inc. (Luminosity), is a global esports franchise that consists of professional esports teams under ownership and management, including the Vancouver Titans Overwatch team and the Seattle Surge Call of Duty team. The Company’s entertainment business owns and operates a mobile gaming event in Europe, Pocket Gamer Connects. Its subsidiaries include GameCo Esports Canada Inc., GameCo eSports USA Inc., Luminosity Gaming Inc., Luminosity Gaming (USA) LLC, Enthusiast Gaming Properties Inc., Enthusiast Gaming Inc., Enthusiast Gaming Live Inc., Enthusiast Gaming Media (US) Inc., TeachMe, Inc., Outplayed, Inc. 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.

Enthusiast Gaming Holdings Inc has a Value Score of 92, which is considered to be undervalued.

Enthusiast Gaming Holdings Inc’s price-to-book ratio is higher than its peers. This could make Enthusiast Gaming Holdings Inc less attractive for value investors when compared to the industry median at 1.97.

You can read more about Enthusiast Gaming 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.

Gravity Co., LTD. (ADR)’s Value Grade

Value Grade:

Gravity Co., Ltd. is a developer, distributor and publisher of online games in Japan and Taiwan. The Company's segments include online games, mobile games and other. Its principal product includes Ragnarok Online, which is a multiplayer online role playing game. It categorizes products into over three categories, such as online games; mobile games and applications, and other games and game-related products and services, including character-based merchandise and animation. It offers over five online games, such as Ragnarok Online, Ragnarok Online II, Requiem, Dragonica (Dragon Saga) and R.O.S.E. Online, which are action adventure massively multiplayer online role-playing games (MMORPG). It develops mobile games, including Ragnarok Online-Uprising: Valkyrie, Ragnarok Online Mobile Story and Ragnarok Violet, and also publishes mobile games licensed from third parties. It provides games for game consoles and handheld game consoles, such as Nintendo DS, Xbox 360 and the PlayStation series.

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.

Gravity Co., LTD. (ADR) has a Value Score of 82, which is considered to be undervalued.

Gravity Co., LTD. (ADR)’s price-earnings ratio is 6.3 compared to the industry median at 25.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Gravity Co., LTD. (ADR) more attractive for value investors.

Gravity Co., LTD. (ADR)’s price-to-book ratio is higher than its peers. This could make Gravity Co., LTD. (ADR) less attractive for value investors when compared to the industry median at 1.97.

You can read more about Gravity Co., 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.

Newegg Commerce Inc’s Value Grade

Value Grade:

Newegg Commerce, Inc. is a global online retailer for PC hardware, consumer electronics, gaming peripherals, home appliances, automotive and lifestyle technology. The Company also serves businesses' e-commerce needs with marketing, supply chain, and technical solutions in a single platform. It has developed an online marketplace that delivers value to consumers, brands and sellers in the technology products sector. Additionally, the Company's platforms offer a comprehensive suite of e-commerce solutions, including product listing, fulfillment, marketing, customer service and other value-added tools and services. Its core customers include both its business-to-consumer (B2C) customers and its business-to-business (B2B) customers. The Company's B2C Platforms include Newegg.com, Newegg.ca, Newegg Global and Mobile apps. NeweggBusiness.com, its B2B e-commerce platform, offers a full range of information technology, office and industrial products and solutions for various 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.

Newegg Commerce Inc has a Value Score of 62, which is considered to be undervalued.

Newegg Commerce Inc’s price-to-book ratio is lower than its peers. This could make Newegg Commerce Inc more attractive for value investors when compared to the industry median at 1.97.

You can read more about Newegg Commerce 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.

Skillz Inc’s Value Grade

Value Grade:

Skillz Inc. (Skillz) is a mobile games platform. The Skillz platform helps developers create franchises. The Company hosts various casual eSports tournaments for various mobile players worldwide. Its technology platform aligns the interests of developers and gamers with respect to user monetization. It monetizes user engagement primarily through prizes. The Company offers a range of gaming experiences for users. It enables game genres that can be played asynchronously, synchronously or turn-based synchronously. Its end-to-end technology platform enables mobile game developers to improve gameplay experiences and drive improved engagement, retention and revenue from their content. It offers an integrated software development kit (SDK), which contains over 200 features, including various social features, such as in-game chat, friends, tournaments and leagues, which allow players to interact and build relationships in the player community.

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.

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

Skillz Inc’s price-to-book ratio is higher than its peers. This could make Skillz Inc less attractive for value investors when compared to the industry median at 1.97.

You can read more about Skillz 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 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.

• Brightcove Inc stock has a Value Grade of B.
• Bumble Inc stock has a Value Grade of B.
• CISO Global Inc stock has a Value Grade of B.
• Enthusiast Gaming Holdings Inc stock has a Value Grade of A.
• Gravity Co., LTD. (ADR) stock has a Value Grade of A.
• Newegg Commerce Inc stock has a Value Grade of B.
• Skillz Inc 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 Monday, July 08
• 4 Undervalued Online Services Stocks for Friday, July 05
• Why Doximity Inc’s (DOCS) Stock Is Up 4.29%
• Why Inspired Entertainment Inc’s (INSE) Stock Is Down 5.30%

AAII Disclaimer

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