Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 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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3 Undervalued Online Services Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Online Services industry for Monday, September 16, 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.

36Kr Holdings Inc - ADR’s Value Grade

Value Grade:

36Kr Holdings Inc. is a company that provides clients with new economy-focused business services, including online advertising services, enterprise value-added services and subscription services. The Company provides reports on companies, market updates, editorials and commentaries, and introduces some startup companies to the investment community. The Company offer services either through agencies or directly to the end customers. The Company operates its businesses primarily in the domestic market.

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.

36Kr Holdings Inc - ADR has a Value Score of 89, which is considered to be undervalued.

When you look at 36Kr Holdings Inc - ADR’s price-to-sales ratio at 0.24 compared to the industry median at 1.35, this company has a lower price relative to revenue compared to its peers. This could make 36Kr Holdings 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. 36Kr Holdings Inc - ADR’s shareholder yield is higher than its industry median ratio of (1.20%). 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. 36Kr Holdings Inc - ADR’s price-to-book ratio is lower than its industry median ratio of 1.71. This could make 36Kr Holdings Inc - ADR more attractive to investors looking for a new addition to their portfolio.

Motorsport Games Inc’s Value Grade

Value Grade:

Motorsport Games Inc. is a motorsport network company. The Company is a racing game developer, publisher and esports ecosystem provider of official motorsport racing series throughout the world. It develops and publishes multi-platform racing video games, including for game consoles, personal computers (PCs), and mobile platforms through various retail and digital channels, including full-game and downloadable content. It operates through two segments: Gaming segment and Esports segment. The Gaming segment is engaged in the development and publishing of interactive racing video games, entertainment content and services. The Esports segment includes organization and facilitation of esports tournaments, competitions, and events for its licensed racing games as well as on behalf of third-party video game racing series and other video game publishers. The Company also owns the rFactor 2 and KartKraft simulation 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.

Motorsport Games Inc has a Value Score of 92, which is considered to be undervalued.

Motorsport Games Inc’s price-earnings ratio is 2.5 compared to the industry median at 22.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Motorsport Games Inc more attractive for value investors.

Motorsport Games Inc’s price-to-book ratio is higher than its peers. This could make Motorsport Games Inc less attractive for value investors when compared to the industry median at 1.71.

You can read more about Motorsport Games 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.

Sohu.com Ltd - ADR’s Value Grade

Value Grade:

Sohu.com Ltd is a China-based company mainly engaged in brand advertising business and online game business. The Company primarily operates through two segments. The Sohu segment is mainly engaged in the brand advertising business. The Changyou segment is mainly engaged in the operation of Changyou online game business and the 17173.com Website. The Company primarily operates in the domestic market.

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.

Sohu.com Ltd - ADR has a Value Score of 96, which is considered to be undervalued.

Sohu.com Ltd - ADR’s price-to-book ratio is higher than its peers. This could make Sohu.com Ltd - ADR less attractive for value investors when compared to the industry median at 1.71.

You can read more about Sohu.com 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.

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 3 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.

• 36Kr Holdings Inc - ADR stock has a Value Grade of A.
• Motorsport Games Inc stock has a Value Grade of A.
• Sohu.com Ltd - ADR stock has a Value Grade of A.

Now that you have a bit more background about each of the 3 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.

• 3 Undervalued Online Services Stocks for Monday, September 16
• 3 Undervalued Online Services Stocks for Friday, September 13
• Why Beyond Inc’s (BYON) Stock Is Up 6.36%
• Why Ibotta Inc’s (IBTA) Stock Is Up 5.91%

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.