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 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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7 Undervalued Software 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 Software industry for Monday, July 15, 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.

FinVolution Group (ADR)’s Value Grade

Value Grade:

FinVolution Group, formerly PPDAI GROUP INC, is a China-based company mainly engaged in operating an online consumer finance platform. The Company’s products and services include loan services offered to borrowers, investment services offered to individual investors and institutional funding partners. The loan services offered to borrowers include standard loan products, consumption loan products and other loan products. The investment services offered to individual investors include self-discretionary investing tools, automated investing tools, investment programs and a secondary loan market. The Company also introduces borrowers to institutional funding partners and provides preliminary credit assessment services as well as other 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.

FinVolution Group (ADR) has a Value Score of 98, which is considered to be undervalued.

When you look at FinVolution Group (ADR)’s price-to-sales ratio at 0.75 compared to the industry median at 3.70, this company has a lower price relative to revenue compared to its peers. This could make FinVolution Group (ADR)’s stock more attractive for value investors.

FinVolution Group (ADR)’s price-earnings ratio is 4.62 compared to the industry median at 45.79. This means it has a lower share price relative to earnings compared to its peers. This could make FinVolution Group (ADR) more attractive for value investors.

Now, let’s assess FinVolution Group (ADR)’s EV/EBITDA ratio, also known as enterprise multiple. At 0.5, when compared to the industry median of 24.9, 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. FinVolution Group (ADR)’s shareholder yield is higher than its industry median ratio of (2.29%). 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. FinVolution Group (ADR)’s price-to-book ratio is lower than its industry median ratio of 3.20. This could make FinVolution Group (ADR) more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at FinVolution Group (ADR)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. FinVolution Group (ADR)’s price-to-free-cash-flow ratio is lower than its industry median ratio of 29.98. This could make FinVolution Group (ADR) more attractive because the lower P/FCF ratio indicates that FinVolution Group (ADR) 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.

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 78, which is considered to be undervalued.

Immersion Corporation’s price-earnings ratio is 7.7 compared to the industry median at 45.8. 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.

WM Technology Inc’s Value Grade

Value Grade:

WM Technology, Inc. operates the online cannabis marketplace for consumers together with a set of eCommerce and compliance software solutions for cannabis businesses, which are sold to retailers and brands in the United States and Canadian cannabis markets. The Company?s business primarily consists of its commerce-driven marketplace (Weedmaps), and its fully integrated suite of end-to-end software-as-a-service (SaaS) solutions software offering (Weedmaps for Business). The Weedmaps marketplace provides cannabis consumers with information regarding cannabis retailers and brands. In addition, the Weedmaps marketplace aggregates data from a variety of sources, including retailer point-of-sale solutions to provide consumers to browse by strain, price, cannabinoids and other information regarding locally available cannabis products, through the Company?s website and mobile apps. Its subscription package includes WM Listings, WM Listings, WM Listings, WM Connectors and WM Insights.

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.

WM Technology Inc has a Value Score of 65, which is considered to be undervalued.

WM Technology Inc’s price-to-book ratio is lower than its peers. This could make WM Technology Inc more attractive for value investors when compared to the industry median at 3.20.

You can read more about WM Technology 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 80, 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.

Sharecare Inc’s Value Grade

Value Grade:

Sharecare, Inc. is a digital healthcare company that helps people manage their health in one place. The Company offers virtual health platform, which is designed to help people, patients, providers, employers, health plans, government organizations, and communities to optimize individual and population-wide well-being by driving positive behavior change. The Company offers Sharecare+, a digital advocacy solution designed to deliver value through benefits navigation, clinical engagement, virtual care, and chronic case and utilization management. Its platform offers an accessible, interactive, personalized, and rewarding environment that aims to transform user engagement with their healthcare from episodic to everyday. The platform provides a single destination for people, patients, and caregivers to access and clinically reviewed content; digitally connect with other patients, community members and healthcare professionals, and adopt action plans provided by healthcare professionals.

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.

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

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

You can read more about Sharecare 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.

Semantix Inc’s Value Grade

Value Grade:

Semantix Inc, formerly Alpha Capital Holdco Co is a Brazil-based company. It is a developer of a data-centric platform that accelerates digital transformation and enhances business performance through seamless, low-code and low-touch data analytics solutions. The Company’s data software is designed to allow customers to access data from any source and develop appropriate analytics to meet their industry and business needs. The Company’s internally developed, frictionless, end-to-end Software as a Service (SaaS) data platform Semantix Data Platform (SDP) guides customers through their entire data lifecycles, from capturing data, to structuring that data in the form of a data lake, then providing easy access to such data for exploration and interaction and, finally, creating reports, dashboards and algorithms fueled by the data to enhance business performance.

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.

Semantix Inc has a Value Score of 79, which is considered to be undervalued.

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

You can read more about Semantix 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.

Viewbix Inc’s Value Grade

Value Grade:

Viewbix Inc, formerly Virtual Crypto Technologies Inc, is an Israel-based video analytics and technology company. The Company provides Vsense, which is a video marketing platform. Vsense allows companies to drive a return on investment (ROI) from their videos while providing insights into viewer engagement. The Company enables users to create video players. It also offers solutions that incorporate templates and editing capabilities enabling subscribers to customize their videos with calls to action across digital platforms.

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.

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

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

You can read more about Viewbix 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 7 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.

• FinVolution Group (ADR) stock has a Value Grade of A.
• Immersion Corporation stock has a Value Grade of B.
• WM Technology Inc stock has a Value Grade of B.
• PLAYSTUDIOS Inc stock has a Value Grade of B.
• Sharecare Inc stock has a Value Grade of B.
• Semantix Inc stock has a Value Grade of B.
• Viewbix 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 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.

• 7 Undervalued Software Stocks for Monday, July 15
• Which Is a Better Investment, Agilysys Inc or Sapiens International Corporation NV Stock?
• Which Is a Better Investment, Alight Inc or Sapiens International Corporation NV Stock?
• Which Is a Better Investment, AppFolio Inc or Sapiens International Corporation NV 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.