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 Thursday, August 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.

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 77, which is considered to be undervalued.

When you look at Alibaba Group Holding Ltd - ADR’s price-to-sales ratio at 1.46 compared to the industry median at 1.05, this company has a higher price relative to revenue compared to its peers. This could make Alibaba Group Holding Ltd - ADR’s stock less attractive for value investors.

Alibaba Group Holding Ltd - ADR’s price-earnings ratio is 17.90 compared to the industry median at 24.39. This means it has a lower share price relative to earnings compared to its peers. This could make Alibaba Group Holding Ltd - ADR more attractive for value investors.

Now, let’s assess Alibaba Group Holding Ltd - ADR’s EV/EBITDA ratio, also known as enterprise multiple. At 6.1, when compared to the industry median of 14.3, 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. Alibaba Group Holding Ltd - ADR’s shareholder yield is higher 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. Alibaba Group Holding Ltd - ADR’s price-to-book ratio is lower than its industry median ratio of 1.87. This could make Alibaba Group Holding Ltd - ADR more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Alibaba Group Holding Ltd - ADR’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Alibaba Group Holding Ltd - ADR’s price-to-free-cash-flow ratio is lower than its industry median ratio of 22.82. This could make Alibaba Group Holding Ltd - ADR more attractive because the lower P/FCF ratio indicates that Alibaba Group Holding Ltd - 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.

Beyond Inc’s Value Grade

Value Grade:

Beyond, Inc. is an e-commerce company. The Company owns Overstock, Bed Bath & Beyond, Baby & Beyond, Zulily, and other related brands and associated intellectual property. Its suite of online shopping brands feature various products. Bed Bath & Beyond is an online furniture and home furnishings retailer in the United States and Canada. Its e-commerce Website sells a range of home products, including furniture, bedding and bath, patio and outdoor, area rugs, tabletop and cookware, decor, storage and organization, small appliances, home improvement, and more. It offers additional products or services, including Business Advertising Opportunities, Marketplace Services, International Sales Support, and Supplier Oasis Integration. Its Supplier Oasis platform is a singular integration point that enables its partners to manage their products, inventory, and sales channels. It also facilitates international sales for customers outside the United States through third-party logistics providers.

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.

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

Beyond Inc’s price-to-book ratio is higher than its peers. This could make Beyond Inc less attractive for value investors when compared to the industry median at 1.87.

You can read more about Beyond 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.

Curiositystream Inc’s Value Grade

Value Grade:

CuriosityStream Inc. is a media and entertainment company that offers video and audio programming across the principal categories of factual entertainment, including science, history, society, nature, lifestyle and technology. The Company provides factual entertainment that informs, enchants and inspires. It provides advertising and sponsorships services through developing integrated digital brand partnerships designed to offer the chance to be associated with CuriosityStream content in a variety of forms, including short- and long-form program integration; branded social media promotional videos; broadcast advertising spots in its video and audio programs that are made available on its linear programming channels or in front of the paywall; and its increasing focus on digital display ads while delivering its content through advertising-based video-on-demand, transactional video-on-demand, free advertising-supported streaming television, YouTube and other similar distribution 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.

Curiositystream Inc has a Value Score of 76, which is considered to be undervalued.

Curiositystream Inc’s price-to-book ratio is higher than its peers. This could make Curiositystream Inc less attractive for value investors when compared to the industry median at 1.87.

You can read more about Curiositystream 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.

Outbrain Inc’s Value Grade

Value Grade:

Outbrain Inc. is a technology platform company that drives business results by connecting media owners and advertisers with engaged audiences to drive business outcomes. The Company’s artificial intelligence (AI) prediction engine powers a two-sided platform for advertisers and media owners that delivers concrete business outcomes. Its platform enables thousands of digital media owners to provide experiences to their audiences, delivering audience engagement and monetization. The Company’s platform provides a suite of solutions specifically to meet the needs of media owners. Its comprehensive media owner suite brings advanced AI-backed prediction technology to the Open Internet, enabling its media partners to enhance their businesses through sustainable monetization, robust audience development, and efficient revenue diversification. It offers a full-stack, cross-funnel advertising solution for advertisers of all sizes from enterprise brands and the agencies.

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.

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

Outbrain Inc’s price-earnings ratio is 26.8 compared to the industry median at 24.4. This means that it has a higher price relative to its earnings compared to its peers. This makes Outbrain Inc less attractive for value investors.

Outbrain Inc’s price-to-book ratio is higher than its peers. This could make Outbrain Inc less attractive for value investors when compared to the industry median at 1.87.

You can read more about Outbrain 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.

So-Young International Inc - ADR’s Value Grade

Value Grade:

SO-YOUNG INTERNATIONAL INC. is a China-based holding company mainly engaged in online destination for discovering, evaluating and reserving medical aesthetic services. The Company operates through two segments: Information Services segment and Reservation Services segment.

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.

So-Young International Inc - ADR has a Value Score of 85, which is considered to be undervalued.

So-Young International Inc - ADR’s price-earnings ratio is 48.8 compared to the industry median at 24.4. This means that it has a higher price relative to its earnings compared to its peers. This makes So-Young International Inc - ADR less attractive for value investors.

So-Young International Inc - ADR’s price-to-book ratio is higher than its peers. This could make So-Young International Inc - ADR less attractive for value investors when compared to the industry median at 1.87.

You can read more about So-Young International 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.

Weibo Corp (ADR)’s Value Grade

Value Grade:

Weibo Corp is a China-based company mainly engaged in social media advertising business. The Company operates two segments. Advertising and Marketing segment mainly provides a full range of advertising customization and marketing solutions. Value-added Services segment mainly provides services such as membership services on social platforms, online games, live broadcasts, social e-commerce and others. The Company also engages in internet and other related businesses, including the provision of internet content and online game operations. The Company's users can create, discover, consume and share various formats of content, including text, photo, video, live streaming and audio on the Weibo platform. The Company's main product is the social platform Weibo.

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.

Weibo Corp (ADR) has a Value Score of 89, which is considered to be undervalued.

Weibo Corp (ADR)’s price-earnings ratio is 6.4 compared to the industry median at 24.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Weibo Corp (ADR) more attractive for value investors.

Weibo Corp (ADR)’s price-to-book ratio is higher than its peers. This could make Weibo Corp (ADR) less attractive for value investors when compared to the industry median at 1.87.

You can read more about Weibo Corp (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.

Yunji Inc (ADR)’s Value Grade

Value Grade:

Yunji Inc. is a China-based company principally involved in social e-commerce business. The Company conducts its businesses mainly through a membership-based model. The Company offers products across a large variety of categories with the aim of catering to daily needs of their users and their households. The Company distributes its products primarily through Yunji Application (App) and mini programs and HTML-5 webpages available in major social platforms in China, including WeChat, QQ, Weibo.

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.

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

Yunji Inc (ADR)’s price-to-book ratio is higher than its peers. This could make Yunji Inc (ADR) less attractive for value investors when compared to the industry median at 1.87.

You can read more about Yunji 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.

• Alibaba Group Holding Ltd - ADR stock has a Value Grade of B.
• Beyond Inc stock has a Value Grade of B.
• Curiositystream Inc stock has a Value Grade of B.
• Outbrain Inc stock has a Value Grade of B.
• So-Young International Inc - ADR stock has a Value Grade of A.
• Weibo Corp (ADR) stock has a Value Grade of A.
• Yunji 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 Thursday, August 08
• 3 Undervalued Online Services Stocks for Wednesday, August 07
• What You Need to Know About ACV Auctions Inc's Q2 Earnings
• What You Need to Know About Bumble Inc's Q2 Earnings

AAII Disclaimer

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