Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 6 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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6 Undervalued Software Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 6 undervalued stocks in the Software industry for Monday, September 30, 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.

Agent Information Software Inc’s Value Grade

Value Grade:

Agent Information Software, Inc., through its wholly owned subsidiaries Auto Graphics, Inc. and A-G Canada, Ltd., provides software products and services used to create, manage, publish and access information content via the Internet/Web. Auto Graphics, Inc. provides software products and services to customers in the library community and publishing markets throughout the United States. A-G Canada Ltd. provides software products and services to customers in the library community in Canada. The Company’s products include VERSO, SHAREit, MONTAGE and RESEARCHit. The VERSO Integrated Library System (ILS) allows library to select and pay for only the services needed. SHAREit is an online-based resource sharing platform. MONTAGE is a cloud-based digital collection solution. RESEARCHit is a federated search solution, that allows researchers to search a range of e-content resources and yield a common de-duplicated result set.

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.

Agent Information Software Inc has a Value Score of 88, which is considered to be undervalued.

When you look at Agent Information Software Inc’s price-to-sales ratio at 0.66 compared to the industry median at 3.69, this company has a lower price relative to revenue compared to its peers. This could make Agent Information Software Inc’s stock more attractive for value investors.

Agent Information Software Inc’s price-earnings ratio is 20.35 compared to the industry median at 43.74. This means it has a lower share price relative to earnings compared to its peers. This could make Agent Information Software Inc more attractive for value investors.

Now, let’s assess Agent Information Software Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 4.9, when compared to the industry median of 22.9, 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. Agent Information Software Inc’s shareholder yield is higher than its industry median ratio of (2.40%). 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. Agent Information Software Inc’s price-to-book ratio is lower than its industry median ratio of 3.23. This could make Agent Information Software Inc more attractive to investors looking for a new addition to their portfolio.

Bridgeline Digital Inc’s Value Grade

Value Grade:

Bridgeline Digital, Inc. is a marketing technology software company. Its Unbound platform is a digital platform that integrates Web content management, e-commerce, e-marketing, digital marketing, and Web analytics. It offers enterprise site search solutions with its Celebros Search and HawkSearch products. The Celebros Search is a commerce-oriented site search product that provides for natural language processing and incorporates artificial intelligence to present relevant search results based on long-tail keyword searches. HawkSearch is a site search, recommendation, and personalization application built for marketers, merchandisers, and developers to enhance online customer's content search. Its Woorank is a search engine optimization (SEO) audit tool that generates an instant performance audit of the site’s technical, on-page, and off-page SEO. Its TruPresence is a Web content management and e-commerce platform to support the needs of multi-unit organizations and franchises.

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.

Bridgeline Digital Inc has a Value Score of 70, which is considered to be undervalued.

Bridgeline Digital Inc’s price-to-book ratio is higher than its peers. This could make Bridgeline Digital Inc less attractive for value investors when compared to the industry median at 3.23.

You can read more about Bridgeline Digital 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.

Dropbox Inc’s Value Grade

Value Grade:

Dropbox, Inc. provides tools to help distributed teams prioritize, get organized, and keep work moving securely from anywhere. Its products include Dropbox Passwords, Vault, Computer Backup, Dropbox Sign, DocSend, Dropbox Capture and FormSwift, among others. Dropbox Passwords allows users to sign into Websites and apps by creating and storing usernames and passwords across devices. Dropbox Vault helps secure and organize sensitive information in the cloud. Computer backup automatically syncs folders on a user's computer to the cloud. Dropbox Sign is an e-signature and document workflow platform that enables customers to easily sign, send and receive documents through its intuitive Web and mobile-based interfaces. DocSend is a secure document sharing and analytics platform. Dropbox Capture is an all-in-one visual communication tool that helps team members share their work and ideas asynchronously. Its customers include individuals, families, teams, and organizations of all sizes.

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.

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

Dropbox Inc’s price-earnings ratio is 13.4 compared to the industry median at 43.7. This means that it has a lower price relative to its earnings compared to its peers. This makes Dropbox Inc more attractive for value investors.

You can read more about Dropbox 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.

Moatable Inc (ADR)’s Value Grade

Value Grade:

Moatable, Inc. help companies, small business owners, and sole proprietors streamline their operations, reach more customers, and close business transactions using its SaaS products and services. It operates two software-as-a-service (SaaS) businesses, Lofty and Trucker Path. Lofty offers a real estate sales acceleration and client lifecycle management platform that allows real estate professionals to obtain and nurture leads, close transactions, and retain their clients. The platform combines Internet data exchange (IDX) websites, lead generation, marketing automation, advanced lead management, and AI to capture and convert leads into new business. Trucker Path is a driver-centric online transportation management platform. Trucker Path provides trip planning, navigation, freight sourcing, a marketplace that offers goods and services truckers use to operate their businesses and helps connect qualified brokers and carriers to expand their reach and initiate and complete transactions.

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.

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

Moatable Inc (ADR)’s price-to-book ratio is higher than its peers. This could make Moatable Inc (ADR) less attractive for value investors when compared to the industry median at 3.23.

You can read more about Moatable 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.

Scienjoy Holding Corp’s Value Grade

Value Grade:

Scienjoy Holding Corp, formerly Wealthbridge Acquisition Ltd, is a Hong Kong-based company mainly engages in the provision of show live streaming video entertainment social platform. The Company mainly operates online live streaming websites and mobile applications under the brand name of Showself, Lehai, and Haixiu.

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.

Scienjoy Holding Corp has a Value Score of 96, which is considered to be undervalued.

Scienjoy Holding Corp’s price-to-book ratio is higher than its peers. This could make Scienjoy Holding Corp less attractive for value investors when compared to the industry median at 3.23.

You can read more about Scienjoy Holding Corp’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.

Tapinator Inc’s Value Grade

Value Grade:

Tapinator, Inc. develops and publishes games for mobile platforms. The Company’s portfolio includes over 300 titles that have over 500 million mobile downloads, including games such as Video Poker Classic and Crypto Trillionaire. It publishes two types of mobile games: Category Leading Games and Rapid-Launch Games. The Company operates NFT500, a digital art collection platform consisting of blue-chip fine art non-fungible tokens (NFTs), consists of approximately 525 fine art NFTs from more than 150 prominent NFT artists, such as Tyler Hobbs, Bored Ape Yacht Club, XCOPY, Helena Sarin, Pindar Van Arman, Monica Rizzolli, Refik Anadol, Manolo Gamboa Naon, Kevin Abosch, Zach Lieberman, Pak, Anne Spalter, Snofro, Hackatao, Bruce Gilden, Justin Aversano, Claire Silver, Zancan, Matt Deslauriers, Dmitri Cherniak, Nick Kuder and Damien Hirst. The Company's Rapid-Launch Games are published primarily under its Tap2Play brand. Its subsidiaries include Tapinator, LLC and Tap2Play, LLC.

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.

Tapinator Inc has a Value Score of 98, which is considered to be undervalued.

Tapinator Inc’s price-to-book ratio is higher than its peers. This could make Tapinator Inc less attractive for value investors when compared to the industry median at 3.23.

You can read more about Tapinator 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 6 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.

• Agent Information Software Inc stock has a Value Grade of A.
• Bridgeline Digital Inc stock has a Value Grade of B.
• Dropbox Inc stock has a Value Grade of B.
• Moatable Inc (ADR) stock has a Value Grade of A.
• Scienjoy Holding Corp stock has a Value Grade of A.
• Tapinator Inc stock has a Value Grade of A.

Now that you have a bit more background about each of the 6 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.

• Mutual Funds Converting to ETFs for Tax Efficiency and Convenience
• Striking the Right Balance Between Growth and Value Stocks
• 6 Undervalued Software Stocks for Monday, September 30
• 5 Undervalued Software Stocks for Friday, September 27

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.