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 Capital Markets 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 Capital Markets 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 Capital Markets 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 Capital Markets industry for Friday, October 04, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Capital Markets 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.

Franklin Resources, Inc.’s Value Grade

Value Grade:

Franklin Resources, Inc. is a publicly owned asset management holding company. Through its subsidiaries, the firm provides its services to individuals, institutions, pension plans, trusts, and partnerships. It launches equity, fixed income, balanced, and multi-asset mutual funds through its subsidiaries. The firm invests in the public equity, fixed income, and alternative markets. Franklin Resources, Inc. was founded in 1947 and is based in San Mateo, California with an additional office in Calgary, Canada; Dubai, United Arab Emirates; Edinburgh, United Kingdom; Fort Lauderdale, United States; Hyderabad, India; London, United Kingdom; Rancho Cordova, United states; Shanghai, China; Singapore; Stamford, United States; and Vienna, Austria.

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.

Franklin Resources, Inc. has a Value Score of 77, which is considered to be undervalued.

When you look at Franklin Resources, Inc.’s price-to-sales ratio at 1.19 compared to the industry median at 2.77, this company has a lower price relative to revenue compared to its peers. This could make Franklin Resources, Inc.’s stock more attractive for value investors.

Franklin Resources, Inc.’s price-earnings ratio is 12.20 compared to the industry median at 20.15. This means it has a lower share price relative to earnings compared to its peers. This could make Franklin Resources, Inc. more attractive for value investors.

Now, let’s assess Franklin Resources, Inc.’s EV/EBITDA ratio, also known as enterprise multiple. At 7.2, when compared to the industry median of 13.4, 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. Franklin Resources, Inc.’s shareholder yield is higher than its industry median ratio of 0.70%. 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. Franklin Resources, Inc.’s price-to-book ratio is lower than its industry median ratio of 1.96. This could make Franklin Resources, Inc. more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Franklin Resources, Inc.’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Franklin Resources, Inc.’s price-to-free-cash-flow ratio is higher than its industry median ratio of 17.80. This could make Franklin Resources, Inc. less attractive because the higher P/FCF ratio indicates that Franklin Resources, Inc. 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.

Bakkt Holdings, Inc.’s Value Grade

Value Grade:

Bakkt Holdings, Inc. offers software as a service and application programming interface solutions for crypto and loyalty, powering engagement, and performance. The company operates Bakkt Marketplace, a platform that enables consumers to buy, sell, and store crypto in an embedded web experience; Bakkt Crypto, a platform that supports clients with a range of crypto solutions; and Bakkt Trust, institutional-grade qualified custody solution for market participants. Its platform also offers a range of loyalty solutions, including redemption solutions for various rewards categories comprising travel, gift cards, and merchandise; travel solutions that offer a retail e-commerce booking platform, as well as live-agent booking and servicing; and unified shopping experience. The company was founded in 2018 and is headquartered in Alpharetta, Georgia.

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.

Bakkt Holdings, Inc. has a Value Score of 74, which is considered to be undervalued.

Bakkt Holdings, Inc.’s price-to-book ratio is higher than its peers. This could make Bakkt Holdings, Inc. less attractive for value investors when compared to the industry median at 1.96.

You can read more about Bakkt 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.

GCM Grosvenor Inc.’s Value Grade

Value Grade:

GCM Grosvenor Inc. is global alternative asset management solutions provider. The firm primarily provides its services to pooled investment vehicles. It also provides its services to investment companies, high net worth individuals, pension and profit sharing plans and state or municipal government entities. The firm invests in equity and alternative investment markets of the United States and internationally. The firm invests in multi-strategy, credit-focused, equity-focused, macro-focused, commodity-focused, and other specialty portfolios. It focuses in hedge fund asset classes, private equity, real estate, and/or infrastructure, credit and absolute return strategies. It also focuses in primary fund investments, secondary fund investments, and co-investments with a focus on buyout, distressed debt, mezzanine, venture capital/growth equity investments. The firm seeks to do seed investments in small, emerging, and diverse private equity firms. The firm seeks to make regionally-focused investments in middle-market buyout. It prefers to invest in aerospace and defense, advanced electronics, information technology, biosciences, and advanced materials. It focuses on Ohio and the Midwest region. The firm employs fundamental and quantitative analysis. GCM Grosvenor Inc. was founded in 1971 and is based in Chicago, Illinois with additional offices in North America, Asia, Australia and 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.

GCM Grosvenor Inc. has a Value Score of 66, which is considered to be undervalued.

You can read more about GCM Grosvenor 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.

Highest Performances Holdings Inc.’s Value Grade

Value Grade:

Highest Performances Holdings Inc. engages in the provision of financial technology services in China. The company distributes publicly raised fund and privately raised securities investment fund products through online and offline. It also offers insurance consulting, trust consulting, asset management, wealth management, and other ancillary services. The company was formerly known as Puyi Inc. and changed its name to Highest Performances Holdings Inc. in March 2024. Highest Performances Holdings Inc. was founded in 2010 and is headquartered in Guangzhou, China.

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.

Highest Performances Holdings Inc. has a Value Score of 78, which is considered to be undervalued.

Highest Performances Holdings Inc.’s price-to-book ratio is higher than its peers. This could make Highest Performances Holdings Inc. less attractive for value investors when compared to the industry median at 1.96.

You can read more about Highest Performances 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.

Silver Spike Investment Corp.’s Value Grade

Value Grade:

Silver Spike Investment Corp., is a a business development company. It is a specialty finance company, focuses on investing across the cannabis ecosystem through investments in the form of direct loans to, and equity ownership of, privately held cannabis companies. It intends to partner with private equity firms, entrepreneurs, business owners, and management teams to provide credit and equity financing alternatives to support buyouts, recapitalizations, growth initiatives, refinancings, and acquisitions across cannabis companies, including cannabis-enabling technology companies, cannabis-related health and wellness companies, and hemp and CBD distribution companies. The company was founded in 2021 and is based in New York, New York.

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.

Silver Spike Investment Corp. has a Value Score of 64, which is considered to be undervalued.

Silver Spike Investment Corp.’s price-earnings ratio is 13.1 compared to the industry median at 20.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Silver Spike Investment Corp. more attractive for value investors.

Silver Spike Investment Corp.’s price-to-book ratio is higher than its peers. This could make Silver Spike Investment Corp. less attractive for value investors when compared to the industry median at 1.96.

You can read more about Silver Spike Investment 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.

Netcapital Inc.’s Value Grade

Value Grade:

Netcapital Inc. operates as a fintech company with a technology platform that allows private companies to raise capital online and provides private equity investment opportunities to investors. The company’s Netcapital Advisors provides marketing and strategic advice and takes equity positions in select companies; Netcapital.com, an SEC-registered funding portal that enables private companies to raise capital online, as well as allows investors to invest from anywhere in the world. It also provides various services, including automated onboarding process and filing of required regulatory documents; compliance review; custom-built offering page on its portal website; email marketing; third party transfer agent and custodial services; and rolling closes which provides access to liquidity before final close date of offerings, as well as assistance with annual fillings and direct access to team for ongoing support. In addition, the company offers advisor services, which includes incubation of technology start-ups; investors introduction; online marketing; website, design, and software development; message crafting including pitch decks, offering pages, and ad creation; strategic advice; and technology consulting services. Netcapital Inc. is based in Boston, Massachusetts.

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.

Netcapital Inc. has a Value Score of 74, which is considered to be undervalued.

Netcapital Inc.’s price-to-book ratio is higher than its peers. This could make Netcapital Inc. less attractive for value investors when compared to the industry median at 1.96.

You can read more about Netcapital 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.

Westwood Holdings Group, Inc.’s Value Grade

Value Grade:

Westwood Holdings Group, Inc., through its subsidiaries, manages investment assets and provides services for its clients. The company operates in two segments, Advisory and Trust. The Advisory segment provides investment advisory services to corporate retirement plans, public retirement plans, endowments, foundations, individuals, and the Westwood Funds; and investment sub-advisory services to mutual funds, pooled investment vehicles, and its Trust segment. The Trust segment offers trust and custodial services; and participates in common trust funds that it sponsors to institutions and high net worth individuals. Westwood Holdings Group, Inc. was founded in 1983 and is based in Dallas, Texas.

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.

Westwood Holdings Group, Inc. has a Value Score of 77, which is considered to be undervalued.

Westwood Holdings Group, Inc.’s price-earnings ratio is 20.1 compared to the industry median at 20.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Westwood Holdings Group, Inc. more attractive for value investors.

Westwood Holdings Group, Inc.’s price-to-book ratio is higher than its peers. This could make Westwood Holdings Group, Inc. less attractive for value investors when compared to the industry median at 1.96.

You can read more about Westwood Holdings Group, 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 Capital Markets 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 Capital Markets stocks as well as other industrys.

Choosing Which of the 7 Best Capital Markets 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.

• Franklin Resources, Inc. stock has a Value Grade of B.
• Bakkt Holdings, Inc. stock has a Value Grade of B.
• GCM Grosvenor Inc. stock has a Value Grade of B.
• Highest Performances Holdings Inc. stock has a Value Grade of B.
• Silver Spike Investment Corp. stock has a Value Grade of B.
• Netcapital Inc. stock has a Value Grade of B.
• Westwood Holdings Group, Inc. stock has a Value Grade of B.

Now that you have a bit more background about each of the 7 undervalued stocks in the Capital Markets 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 Capital Markets Stocks

Want to learn more about Capital Markets 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 Capital Markets Stocks for Friday, October 04
• 3 Undervalued Corporate Financial Services Stocks for Tuesday, October 01
• 3 Undervalued Investment Banking & Brokerage Services Stocks for Monday, September 30
• Why Noah Holdings Limited (ADR)’s (NOAH) Stock Is Up 11.48%

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.