Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 stocks made the list for top value stocks in the Diversified Consumer 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 Diversified Consumer 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.

Click the button below to learn more about A+ Investor and subscribe today.

4 Undervalued Diversified Consumer Services Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the Diversified Consumer Services industry for Thursday, October 17, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Diversified Consumer 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.

Chegg, Inc.’s Value Grade

Value Grade:

Chegg, Inc. operates a direct-to-student learning platform that helps learners build essential life and job skills to accelerate their path from learning programs in the United States and internationally. Its subscription services include Chegg Study, which offers personalized step-by-step learning support from AI, computational engines, and subject matter experts, as well as Tinger Gold and DashPash Student services; Chegg Writing that provides students with a suite of tools, such as plagiarism detection scans, grammar and writing fluency checking, expert personalized writing feedback, and premium citation generation; Chegg Math, a step-by-step math problem solver and calculator that helps students to solve problems; Chegg Study Pack, a bundle of various subscription product offerings, including Chegg Study, Chegg Writing, and Chegg Math services; and Busuu, an online language learning platform that offers comprehensive support through self-paced lessons, live classes with expert tutors, and a community of members to practice alongside. The company also provides a skills-based learning platform to learn technical skills comprising AI, coding, data analytics, and cybersecurity, as well as competencies consisting of emotional intelligence, mindset, emerging leadership, and decision making. In addition, it rents and sells print textbooks and eTextbooks; and offers advertising services. The company serves students and companies through direct marketing channels and social media. Chegg, Inc. was incorporated in 2005 and is headquartered in Santa Clara, California.

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.

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

When you look at Chegg, Inc.’s price-to-sales ratio at 0.25 compared to the industry median at 1.11, this company has a lower price relative to revenue compared to its peers. This could make Chegg, Inc.’s stock more attractive for value investors.

Now, let’s assess Chegg, Inc.’s EV/EBITDA ratio, also known as enterprise multiple. At 12.9, when compared to the industry median of 11.7, the company may be considered overvalued 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. Chegg, Inc.’s shareholder yield is higher than its industry median ratio of 0.00%. 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. Chegg, Inc.’s price-to-book ratio is lower than its industry median ratio of 1.46. This could make Chegg, Inc. more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Chegg, Inc.’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Chegg, Inc.’s price-to-free-cash-flow ratio is lower than its industry median ratio of 16.80. This could make Chegg, Inc. more attractive because the lower P/FCF ratio indicates that Chegg, 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.

Gaotu Techedu Inc.’s Value Grade

Value Grade:

Gaotu Techedu Inc., a technology-driven education company, provides learning services, educational content, and digitalized learning products in the People’s Republic of China. The company offers traditional online academic subject tutoring services that covers academic subjects, such as mathematics, English, Chinese, physics, chemistry, biology, history, geography, and political science for students; non-academic tutoring services; personal interest courses comprising chess learning, family relationships and education, humanities, and science courses; and professional courses primarily for college students and adults preparing for professional qualification exams, such as teacher’s qualification, Chartered Financial Analyst designation, Certified Public Accountant designation, and other exams. It also offers admission courses for admission tests and interviews, including national-post graduate entrance examination, civil service examinations, and others; foreign language courses; overseas study related services; and courses to prepare and pass certain language exams for study abroad, such as IELTS and TOEFL. In addition, the company designs and develops course outlines, interactive courseware, practice exercises, and lesson notes; publishes reference books comprising Chinese dictionary, dictionary of idioms, and past exam questions for the college entrance examination; and develops, expands, and upgrades education-centric digital products and solutions, as well as learning apps. Further, it offers books and digitalized auxiliary learning tools, such as smart devices and translation pens; and online tutoring services. The company was formerly known as GSX Techedu Inc. and changed its name to Gaotu Techedu Inc. in June 2021. Gaotu Techedu Inc. was incorporated in 2014 and is headquartered in Beijing, 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.

Gaotu Techedu Inc. has a Value Score of 97, which is considered to be undervalued.

Gaotu Techedu Inc.’s price-to-book ratio is higher than its peers. This could make Gaotu Techedu Inc. less attractive for value investors when compared to the industry median at 1.46.

You can read more about Gaotu Techedu 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.

QuantaSing Group Limited’s Value Grade

Value Grade:

QuantaSing Group Limited provides online learning services in the People’s Republic of China. It operates through two segments, Learning Service and Others; and Consumer Business. The company offers online courses in the field of financial literacy; skills upgrading comprising short-video production courses; and recreation and leisure that include personal well-being, standing meditation, and calligraphy courses; as well as electronic keyboard courses. It also offers marketing and enterprise talent management services to enterprise customers. In addition, the company provides online and literacy courses to adult learners under various brands, including QiNiu, JiangZhen, and QianChi. The company provides courses to individual users through mobile and other online channels. QuantaSing Group Limited was founded in 2019 and is headquartered in Beijing, the People’s Republic of 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.

QuantaSing Group Limited has a Value Score of 100, which is considered to be undervalued.

QuantaSing Group Limited’s price-earnings ratio is 3.8 compared to the industry median at 21.4. This means that it has a lower price relative to its earnings compared to its peers. This makes QuantaSing Group Limited more attractive for value investors.

QuantaSing Group Limited’s price-to-book ratio is higher than its peers. This could make QuantaSing Group Limited less attractive for value investors when compared to the industry median at 1.46.

You can read more about QuantaSing Group Limited’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.

Sunlands Technology Group’s Value Grade

Value Grade:

Sunlands Technology Group provides online education services through online and mobile platforms in the People’s Republic of China. It offers adult online education and adult personal interest learning education through courses and educational content offerings, including interest, professional skills and professional certification preparation courses, and degree- or diploma-oriented post-secondary courses. The company provides professional assistance and counseling services to help students make decisions that suit their learning needs and to formulate study plans throughout their enrollments in the courses; and exam preparation courses for exam-taking students. In addition, the company offers degree- or diploma-oriented post-secondary course that consist of preparation courses for a state-administered exam for learners pursuing associate diplomas or bachelor’s degrees, and other degree- or diploma-oriented post-secondary courses. Further, it provides professional certification preparation courses cover various industries and professions, such as accounting, human resources, and teaching, as well as technical and consultation services. The company was formerly known as Sunlands Online Education Group and changed its name to Sunlands Technology Group in August 2018. Sunlands Technology Group was founded in 2003 and is headquartered in Beijing, the People’s Republic of 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.

Sunlands Technology Group has a Value Score of 99, which is considered to be undervalued.

Sunlands Technology Group’s price-earnings ratio is 1.6 compared to the industry median at 21.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Sunlands Technology Group more attractive for value investors.

Sunlands Technology Group’s price-to-book ratio is higher than its peers. This could make Sunlands Technology Group less attractive for value investors when compared to the industry median at 1.46.

You can read more about Sunlands Technology Group’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 Diversified Consumer 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 Diversified Consumer Services stocks as well as other industrys.

Choosing Which of the 4 Best Diversified Consumer 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.

• Chegg, Inc. stock has a Value Grade of A.
• Gaotu Techedu Inc. stock has a Value Grade of A.
• QuantaSing Group Limited stock has a Value Grade of A.
• Sunlands Technology Group stock has a Value Grade of A.

Now that you have a bit more background about each of the 4 undervalued stocks in the Diversified Consumer 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 Diversified Consumer Services Stocks

Want to learn more about Diversified Consumer 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 Diversified Consumer Services Stocks for Thursday, October 17
• 6 Undervalued Diversified Consumer Services Stocks for Wednesday, October 16
• 5 Undervalued Diversified Consumer Services Stocks for Tuesday, October 15
• 7 Undervalued Diversified Consumer Services Stocks for Monday, October 14

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.