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 Thursday, January 05, 2023. 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.

Cheetah Mobile Inc (ADR)’s Value Grade

Value Grade:

Cheetah Mobile Inc. is a holding company. The Company and its consolidated subsidiaries, variable interest entities (VIEs) and a VIE's subsidiary are engaged in the provision of online marketing services, Internet value-added services, and Internet security services and others. The Company operates a platform that offers mobile and personal computer (PC) applications for its users and global content promotional channels for its customers, both of which are powered by its cloud-based data analytics engines. For its users, its diversified suite of applications optimizes mobile and PC Internet system performance, and provides real time protection against known and unknown security threats. Its data analytics engines perform real time analysis of mobile applications, program files and Websites on their devices for behavior that may impair system performance or impose security risks.

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 (ADR) has a Value Score of 67, which is considered to be undervalued.

When you look at Cheetah Mobile Inc (ADR)’s price-to-sales ratio at 0.56 compared to the industry median at 3.83, this company has a lower price relative to revenue compared to its peers. This could make Cheetah Mobile Inc (ADR)’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. Cheetah Mobile Inc (ADR)’s shareholder yield is higher than its industry median ratio of (2.78%). 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. Cheetah Mobile Inc (ADR)’s price-to-book ratio is lower than its industry median ratio of 3.32. This could make Cheetah Mobile Inc (ADR) more attractive to investors looking for a new addition to their portfolio.

Healthcare Triangle Inc’s Value Grade

Value Grade:

Healthcare Triangle, Inc. is a healthcare information technology company, which is focused on advancing , industry-transforming solutions in the areas of cloud services, data science, professional and managed services for the healthcare and life sciences industry. The Company supports healthcare delivery organizations, healthcare insurance companies, pharmaceutical, and life sciences, biotech companies, and medical device manufacturers in their efforts to improve data management, develop analytical insights into their operations, and deliver measurable clinical, financial, and operational improvements. It offers a comprehensive suite of software, solutions, platforms and services that enables some of healthcare and pharma organizations to deliver personalized healthcare, precision medicine, advances in drug discovery, development and efficacy, collaborative research and development, respond to real-world evidence, and accelerate their digital transformation.

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.

Healthcare Triangle Inc has a Value Score of 100, which is considered to be undervalued.

Healthcare Triangle Inc’s price-to-book ratio is higher than its peers. This could make Healthcare Triangle Inc less attractive for value investors when compared to the industry median at 3.32.

You can read more about Healthcare Triangle 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.

Cue Health Inc’s Value Grade

Value Grade:

Cue Health Inc. is a healthcare technology company. The Company is engaged in providing individuals with a connected diagnostic platform that bridges the physical and virtual care continuum. Its platform, Cue Integrated Care Platform, which consists of hardware and software components: the Cue Health Monitoring System, which is made up of a portable, durable and reusable reader, or Cue Reader, a single-use test cartridge, or Cue Cartridge, and a sample collection wand, or Cue Wand; Cue Data and Innovation Layer, with cloud-based data and analytics capability; Cue Virtual Care Delivery Apps, including its app and Cue Enterprise Dashboard, and its Cue Ecosystem Integrations and apps, which allow for integrations with third party applications and sensors. Its products include Cue Reader, COVID-19 Test, COVID-19-Cue Care, UTI Test Strips and UTI- Cue Care. It offers solutions for home/personal, business, healthcare, retail pharmacies, sports and entertainment, and education sectors.

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.

Cue Health Inc has a Value Score of 83, which is considered to be undervalued.

Cue Health Inc’s price-to-book ratio is higher than its peers. This could make Cue Health Inc less attractive for value investors when compared to the industry median at 3.32.

You can read more about Cue Health 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.

iSpecimen Inc’s Value Grade

Value Grade:

iSpecimen Inc. is a technology-driven company. The Company designed iSpecimen Marketplace platform to transform the biospecimen procurement process to accelerate medical discovery. Its technology consolidates the biospecimen buying experience in a single, online marketplace that brings together healthcare providers who have biospecimens and researchers across industry, academia, and government institutions who need them. The Company’s marketplace platform ingests de-identified healthcare data provided by healthcare supply partners. The iSpecimen Marketplace supports the supply chain management and bioprocurement process for specimens and associated data. The Company’s platform helps with administrating and reporting function for researchers, suppliers, and internal personnel, including user and compliance management. The Company serves to biopharmaceutical companies, in vitro diagnostic (IVD) companies, and government/academic institutions.

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.

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

iSpecimen Inc’s price-to-book ratio is higher than its peers. This could make iSpecimen Inc less attractive for value investors when compared to the industry median at 3.32.

You can read more about iSpecimen 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.

WM Technology Inc’s Value Grade

Value Grade:

WM Technology, Inc. is a marketplace and technology solutions provider primarily servicing the cannabis industry, which includes consumers, retailers and brands in the United States and Canadian cannabis markets. The Company's business consists of its commerce-driven marketplace, Weedmaps, and monthly subscription software offering, WM Business. Weedmaps marketplace provides information on the cannabis plant and the industry and advocates for legalization. The Weedmaps marketplace provides consumers with information regarding cannabis retailers and brands, as well as the strain, pricing, and other information regarding locally available cannabis products, through its Website and mobile applications. WM Business is a set of e-commerce and compliance software solutions including WM Orders, WM Dispatch, WM Store, WM Dashboard, its integrations and application programming interface (API) platform, as well as access to its WM Retail and WM Exchange products.

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.

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

WM Technology Inc’s price-earnings ratio is 2.8 compared to the industry median at 36.9. This means that it has a lower price relative to its earnings compared to its peers. This makes WM Technology Inc more attractive for value investors.

WM Technology Inc’s price-to-book ratio is higher than its peers. This could make WM Technology Inc less attractive for value investors when compared to the industry median at 3.32.

You can read more about WM 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.

Hello Group Inc (ADR)’s Value Grade

Value Grade:

Hello Group Inc, formerly Momo Inc, is a China-based online social and entertainment company. The Company operates in three segments. Momo segment and Tantan segment mainly provide live video service, value-added services including membership subscription and virtual gift service, and mobile marketing services including advertising and marketing solutions. QOOL segment provides music service revenues, film distribution service and film promotion service. The Company also operates other applications to serve different social and entertainment demands from its users.

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.

Hello Group Inc (ADR) has a Value Score of 86, which is considered to be undervalued.

Hello Group Inc (ADR)’s price-to-book ratio is higher than its peers. This could make Hello Group Inc (ADR) less attractive for value investors when compared to the industry median at 3.32.

You can read more about Hello Group 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.

Upland Software Inc’s Value Grade

Value Grade:

Upland Software, Inc. is a provider of cloud-based enterprise work management software. The Company products include AccuRoute, Adestra, Altify, BlueVenn, Cimpl, ComSci, Eclipse PPM, FileBound, InGenius, Intelligent Capture, InterFAX, Kapost, Localytics, Mobile Messaging, Objectif Lune, Panviva, PostUp, PowerSteering, professional services automation (PSA), Qvidian, Rant & Rave, RightAnswers, RO Innovation, Second Street and Ultriva. It offers its products for business operations, contact center, human resource and legal, information technology, marketing, project management and sales. Its customers operate in a range of industries, including financial services, consulting services, technology, manufacturing, media, telecommunications, government, political, non-profit, healthcare, life sciences, retail and hospitality. Its applications deliver value to the customer experience (CXM), including mobile messaging, mobile application marketing and Voice of Customer engagement (VoC).

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.

Upland Software Inc has a Value Score of 65, which is considered to be undervalued.

Upland Software Inc’s price-to-book ratio is higher than its peers. This could make Upland Software Inc less attractive for value investors when compared to the industry median at 3.32.

You can read more about Upland Software 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 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.

• Cheetah Mobile Inc (ADR) stock has a Value Grade of B.
• Healthcare Triangle Inc stock has a Value Grade of A.
• Cue Health Inc stock has a Value Grade of A.
• iSpecimen Inc stock has a Value Grade of B.
• WM Technology Inc stock has a Value Grade of B.
• Hello Group Inc (ADR) stock has a Value Grade of A.
• Upland Software 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 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.

• 7 Undervalued Software Stocks for Thursday, January 05
• Which Is a Better Investment, AppFolio Inc or Descartes Systems Group Inc (USA) Stock?
• Which Is a Better Investment, AppFolio Inc or Guidewire Software Inc Stock?
• Which Is a Better Investment, AppFolio Inc or Lightspeed Commerce Inc Stock?

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.