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 Tuesday, September 24, 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.

Baidu Inc (ADR)’s Value Grade

Value Grade:

Baidu Inc is a Chinese language Internet search provider. The Company offers a Chinese language search platform on its Baidu.com Website that enables users to find information online, including Webpages, news, images, documents and multimedia files, through links provided on its Website. The Company operates through two segments, Baidu Core segment and iQIYI segment. Baidu Core mainly provides search-based, feed-based, and other online marketing services, as well as products and services from the Company’s new artificial intelligence (AI) initiatives. Within Baidu Core, the Company’s product and services offerings are categorized as Mobile Ecosystem, Baidu AI Cloud and Intelligent Driving & Other Growth Initiatives. iQIYI is an online entertainment service provider that offers original, professionally produced and partner-generated content on its platform.

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.

Baidu Inc (ADR) has a Value Score of 79, which is considered to be undervalued.

When you look at Baidu Inc (ADR)’s price-to-sales ratio at 1.61 compared to the industry median at 1.43, this company has a higher price relative to revenue compared to its peers. This could make Baidu Inc (ADR)’s stock less attractive for value investors.

Baidu Inc (ADR)’s price-earnings ratio is 11.27 compared to the industry median at 22.92. This means it has a lower share price relative to earnings compared to its peers. This could make Baidu Inc (ADR) more attractive for value investors.

Now, let’s assess Baidu Inc (ADR)’s EV/EBITDA ratio, also known as enterprise multiple. At 9.0, when compared to the industry median of 12.6, 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. Baidu Inc (ADR)’s shareholder yield is higher than its industry median ratio of (1.26%). 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. Baidu Inc (ADR)’s price-to-book ratio is lower than its industry median ratio of 1.64. This could make Baidu Inc (ADR) more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Baidu Inc (ADR)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Baidu Inc (ADR)’s price-to-free-cash-flow ratio is lower than its industry median ratio of 22.54. This could make Baidu Inc (ADR) more attractive because the lower P/FCF ratio indicates that Baidu Inc (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.

Cango Inc - ADR’s Value Grade

Value Grade:

Cango Inc. provides an automotive transaction service platform, which connects dealers, financial institutions, car buyers and other industry participants. The Company’s services primarily consist of automotive financing facilitation, automotive transaction facilitation and after-market services facilitation. It offers integrated solutions that support the life cycle of automotive financing transactions, including credit origination, credit assessment, credit servicing and delinquent asset management services. It provides additional services, including car sourcing and logistics and warehousing support for dealers and facilitation of car purchases for car buyers. The Company’s also facilitates after-market services to car buyers, which is comprised of facilitating the sale of insurance policies from insurance brokers or companies. The products offered through its platform are personal accident insurances and automotive insurances.

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.

Cango Inc - ADR has a Value Score of 81, which is considered to be undervalued.

Cango Inc - ADR’s price-earnings ratio is 72.9 compared to the industry median at 22.9. This means that it has a higher price relative to its earnings compared to its peers. This makes Cango Inc - ADR less attractive for value investors.

Cango Inc - ADR’s price-to-book ratio is higher than its peers. This could make Cango Inc - ADR less attractive for value investors when compared to the industry median at 1.64.

You can read more about Cango 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.

Enthusiast Gaming Holdings Inc’s Value Grade

Value Grade:

Enthusiast Gaming Holdings Inc. is a gaming media and entertainment company. The Company operates in one industry segment, being digital media and entertainment. Its principal business activities are comprised of media and content, esports and entertainment and subscription. The Company's digital media platform includes its flagship video gaming related owned and operated websites, content channels including YouTube and casual games, where the Company derives the vast majority of its media and content revenue. The Company's esports and entertainment business, includes Luminosity Gaming Inc. (Luminosity Gaming), a global esports franchise that consists of professional esports teams under ownership and management, and Pocket Gamer Connects, global mobile gaming events. It has fully owned teams competing in Apex Legends, Overwatch, Super Smash Bros: Ultimate, Brawl Stars, and Pokemon Unite.

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 91, 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 1.64.

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.

Fintech Scion Ltd’s Value Grade

Value Grade:

Fintech Scion Limited offers digital banking services. The Company provides the tools, skills, and solutions to facilitate payment services to merchants, offering a variety of secured, online, and fully managed transactions and settlements. It also provides online businesses, providing comprehensive solutions encompassing payment collection, cross-border transactions, FX services, and corporate bank accounts. It caters to a specific subset of online businesses that grapple with establishing and maintaining physical bank accounts across multiple territories. The Company’s cutting-edge payments platform boasts a comprehensive suite of integrated payment products and services tailored to various channels be it instore, online, or through mobile and tablet interfaces. Its diverse merchant base ranges from small to medium-sized enterprises, or SMEs, to large enterprises, spanning sectors such as hospitality, e-gaming, consulting, retail, marketing, and e-commerce.

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.

Fintech Scion Ltd has a Value Score of 88, which is considered to be undervalued.

Fintech Scion Ltd’s price-to-book ratio is higher than its peers. This could make Fintech Scion Ltd less attractive for value investors when compared to the industry median at 1.64.

You can read more about Fintech Scion Ltd’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.

GigaCloud Technology Inc’s Value Grade

Value Grade:

GigaCloud Technology Inc is a holding company mainly engaged in the business to business (B2B) electronic commerce (e-commerce) business for large parcel merchandise. The Company is engaged in the operation of e-commerce platform named GigaCloud Marketplace which integrates product discovery, payments, and logistics tools. The Company’ business areas include global furniture markets, home appliances, fitness equipment and others. In addition, the Company is engaged in the operation of warehouses. The Company also sells its products through third-party e-commerce websites.

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.

GigaCloud Technology Inc has a Value Score of 78, which is considered to be undervalued.

GigaCloud Technology Inc’s price-earnings ratio is 6.5 compared to the industry median at 22.9. This means that it has a lower price relative to its earnings compared to its peers. This makes GigaCloud Technology Inc more attractive for value investors.

GigaCloud Technology Inc’s price-to-book ratio is lower than its peers. This could make GigaCloud Technology Inc more attractive for value investors when compared to the industry median at 1.64.

You can read more about GigaCloud 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.

Liberty Tripadvisor Holdings Inc’s Value Grade

Value Grade:

Liberty TripAdvisor Holdings, Inc., through its subsidiary, Tripadvisor, Inc. (Tripadvisor), provides a travel platform, aggregating reviews and opinions from its community of travelers about accommodations, restaurants, experiences, airlines and cruises throughout the world. Tripadvisor operates through three segments: Brand Tripadvisor, Viator and TheFork. The Brand Tripadvisor segment includes Tripadvisor-branded hotels, media and advertising, and Tripadvisor experiences and dining business. The Viator segment provides an online marketplace that allows travelers to research and book tours, activities and attractions in popular travel destinations across the globe through its Viator branded platform, which includes Website, mobile Web, and mobile app. TheFork segment offers travelers and diners an online marketplace that provides access to approximately 55,000 restaurants to discover and book reservations in 11 countries across the United Kingdom, and western and central Europe.

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.

Liberty Tripadvisor Holdings Inc has a Value Score of 95, which is considered to be undervalued.

You can read more about Liberty Tripadvisor 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.

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 1.64.

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.

• Baidu Inc (ADR) stock has a Value Grade of B.
• Cango Inc - ADR stock has a Value Grade of A.
• Enthusiast Gaming Holdings Inc stock has a Value Grade of A.
• Fintech Scion Ltd stock has a Value Grade of A.
• GigaCloud Technology Inc stock has a Value Grade of B.
• Liberty Tripadvisor Holdings Inc 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.

• 4 Undervalued Online Services Stocks for Tuesday, September 24
• 7 Undervalued Online Services Stocks for Monday, September 23
• Why EverQuote Inc’s (EVER) Stock Is Down 4.84%
• Why Maplebear Inc’s (CART) Stock Is Down 4.56%

AAII Disclaimer

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