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 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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7 Undervalued Software 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 Software industry for Tuesday, October 29, 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.

Femto Technologies Inc.’s Value Grade

Value Grade:

Femto Technologies Inc. develops and manufactures women’s wellness devices and services. It offers its products for muscle relief and relaxation, redefining skin, and nurturing its hair, as well as sexual wellness devices. The company owns and markets Benefit customer relationship management (CRM), a proprietary customer relationship management software product that enables small and medium-sized enterprises to optimize day-to-day business activities. Femto Technologies Inc. is based in Kiryat Motzkin, Israel.

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.

Femto Technologies Inc. has a Value Score of 75, which is considered to be undervalued.

When you look at Femto Technologies Inc.’s price-to-sales ratio at 2.06 compared to the industry median at 3.87, this company has a lower price relative to revenue compared to its peers. This could make Femto Technologies Inc.’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. Femto Technologies Inc.’s shareholder yield is higher than its industry median ratio of (2.60%). 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. Femto Technologies Inc.’s price-to-book ratio is lower than its industry median ratio of 3.60. This could make Femto Technologies Inc. more attractive to investors looking for a new addition to their portfolio.

BIT Mining Limited’s Value Grade

Value Grade:

BIT Mining Limited operates as a cryptocurrency mining company in the Mainland China, the United States, and Hong Kong. The company operates in two segments: Data Center and Cryptocurrency Mining. It operates a cryptocurrency mining data center in Ohio with power capacity of 82.5 megawatts; and purchases and deploys bitcoin mining machines. In addition, it engages in online gaming activities; and provision of technology services. The company was formerly known as 500.com Limited and changed its name to BIT Mining Limited in April 2021. BIT Mining Limited was founded in 2001 and is based in Akron, Ohio.

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.

BIT Mining Limited has a Value Score of 60, which is considered to be fairly valued.

BIT Mining Limited’s price-to-book ratio is higher than its peers. This could make BIT Mining Limited less attractive for value investors when compared to the industry median at 3.60.

You can read more about BIT Mining 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.

Cheetah Mobile Inc.’s Value Grade

Value Grade:

Cheetah Mobile Inc. along with its subsidiaries, engages in provision of internet services, artificial intelligence, and other services in the People’s Republic of China, Hong Kong, Japan, and internationally. The company’s internet products include Duba Anti-virus, an internet security application to protect users against known and unknown security threats and malicious applications; and Clean Master, a junk file cleaning, memory boosting, and privacy protection tool for mobile devices. It also offers value-added products, such as PC and mobile products, as well as wallpaper, office optimization software, and others; E-Coupon vending robot, a delivery and reception robot, which includes marketing campaigns and services; and multi-cloud management platform and overseas advertising agency service. In addition, the company provides mobile advertising services; duba.com personal start page that aggregates online resources and provides users access to their online destinations, such as online shopping, video, online game, travel, and local information; artificial intelligence and other services; and premium membership services. It serves mobile advertising networks and partners, e-commerce companies, mobile application developers, and mobile game developers, as well as individual customers. The company was formerly known as Kingsoft Internet Software Holdings Limited and changed its name to Cheetah Mobile Inc. in March 2014. Cheetah Mobile Inc. was incorporated in 2009 and is based 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.

Cheetah Mobile Inc. has a Value Score of 87, which is considered to be undervalued.

Cheetah Mobile Inc.’s price-to-book ratio is higher than its peers. This could make Cheetah Mobile Inc. less attractive for value investors when compared to the industry median at 3.60.

You can read more about Cheetah Mobile 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.

HeartCore Enterprises, Inc.’s Value Grade

Value Grade:

HeartCore Enterprises, Inc., a software development company, provides Software as a Service solutions to enterprise customers in Japan and internationally. Its customer experience management platform includes marketing, sales, service, and content management systems, as well as other tools and integrations, which enable companies to enhance the customer experience and drive engagement. The company also operates a digital transformation business that offers customers with robotics process automation, process mining, and task mining to accelerate the digital transformation of enterprises. In addition, it provides consulting services; and education, services, and support solutions. The company was founded in 2009 and is headquartered in Tokyo, Japan.

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.

HeartCore Enterprises, Inc. has a Value Score of 64, which is considered to be undervalued.

HeartCore Enterprises, Inc.’s price-to-book ratio is higher than its peers. This could make HeartCore Enterprises, Inc. less attractive for value investors when compared to the industry median at 3.60.

You can read more about HeartCore Enterprises, 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.

Aurora Mobile Limited’s Value Grade

Value Grade:

Aurora Mobile Limited, through its subsidiaries, provides a range of developer services in China. The company provides push notification, instant messaging, analytics, sharing and short message service, one-click verification, and other services. The company offers real-time market intelligence solutions, such as product iApp, which provides analysis and statistical results on the usage and trends of mobile apps to investment funds and corporations. It also provides financial risk management solutions to assist financial institutions, licensed lenders, and credit card companies in making informed lending and credit decisions; and location-based intelligence services. In addition, the company offers application programming interfaces that create connectivity and automate the process of message exchange between the mobile apps and its backend network; an interactive web-based service dashboard that allows app developers to utilize and monitor its services through controls on an ongoing basis; and value added services, such as Advertisement SAAS, a data management platform service, which provides tagged and de-identified population data package; JG Alliance, an integrated marketing campaign services to advertising customers; and AD Mediation Platform to help mobile app developers access other mainstream advertising platforms. It primarily serves mobile app developers in a range of industries, such as media, entertainment, gaming, financial services, tourism, ecommerce, education, and healthcare. Aurora Mobile Limited was founded in 2011 and is headquartered in Shenzhen, 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.

Aurora Mobile Limited has a Value Score of 96, which is considered to be undervalued.

Aurora Mobile Limited’s price-to-book ratio is higher than its peers. This could make Aurora Mobile Limited less attractive for value investors when compared to the industry median at 3.60.

You can read more about Aurora Mobile 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.

LM Funding America, Inc.’s Value Grade

Value Grade:

LM Funding America, Inc. operates as a cryptocurrency mining and specialty finance company. It operates through two segments, Specialty Finance and Mining Operations. The company also engages in Bitcoin mining operations; and provides funding to nonprofit community associations. The company was founded in 2008 and is based in Tampa, Florida.

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.

LM Funding America, Inc. has a Value Score of 73, which is considered to be undervalued.

LM Funding America, Inc.’s price-to-book ratio is higher than its peers. This could make LM Funding America, Inc. less attractive for value investors when compared to the industry median at 3.60.

You can read more about LM Funding America, 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.

YXT.COM Group Holding Limited’s Value Grade

Value Grade:

YXT.COM Group Holding Limited, through its subsidiaries, provides digital corporate learning solution in the People’s Republic of China. The company offers corporate learning platform, personalized e-learning system, teaching tools, and online courses, as well as offline courses and courseware recording service. It also engages in the technology development; and sale of Software-as-a-Service and content. YXT.COM Group Holding Limited was formerly known as Unicentury Group Holding Limited and changed its name to YXT.COM Group Holding Limited in May 2021. The company was founded in 2011 and is based in Suzhou, 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.

YXT.COM Group Holding Limited has a Value Score of 85, which is considered to be undervalued.

YXT.COM Group Holding Limited’s price-to-book ratio is higher than its peers. This could make YXT.COM Group Holding Limited less attractive for value investors when compared to the industry median at 3.60.

You can read more about YXT.COM Group Holding 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.

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 7 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.

• Femto Technologies Inc. stock has a Value Grade of B.
• BIT Mining Limited stock has a Value Grade of C.
• Cheetah Mobile Inc. stock has a Value Grade of A.
• HeartCore Enterprises, Inc. stock has a Value Grade of B.
• Aurora Mobile Limited stock has a Value Grade of A.
• LM Funding America, Inc. stock has a Value Grade of B.
• YXT.COM Group Holding Limited stock has a Value Grade of A.

Now that you have a bit more background about each of the 7 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.

• 5 Undervalued Software Stocks for Tuesday, October 29
• 7 Undervalued Software Stocks for Monday, October 28
• 4 Undervalued Software Stocks for Friday, October 25
• 3 Undervalued Software Stocks for Thursday, October 24

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.