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 Online 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 Online 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.

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7 Undervalued Online Services 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 Online Services industry for Friday, March 10, 2023. Let’s take a closer look at their individual scores to see how they measure up against each other and the Online 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.

Curiositystream Inc’s Value Grade

Value Grade:

Curiositystream Inc. is a media and entertainment company that offers premium video programming across the principal categories of factual entertainment, including science, history, society, nature, lifestyle and technology. The Company provides premium factual entertainment that informs, enchants and inspires. The Company is also focused on offering high-quality factual entertainment through subscription video on demand (SVoD) platforms, as well as through bundled content licenses for SVoD and linear offerings, partner bulk sales, brand partnerships and content sales. Its sponsorship and advertising business consists of developing integrated digital brand partnerships with CuriosityStream content in a variety of forms, including short and long form program integration, branded social media promotional videos, broadcast advertising spots, and digital display ads. The CuriosityStream is available to watch on Roku, Apple television (TV), Amazon Fire TV and gaming consoles like Xbox.

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.

Curiositystream Inc has a Value Score of 80, which is considered to be undervalued.

When you look at Curiositystream Inc’s price-to-sales ratio at 0.83 compared to the industry median at 1.32, this company has a lower price relative to revenue compared to its peers. This could make Curiositystream 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. Curiositystream Inc’s shareholder yield is higher than its industry median ratio of (2.43%). 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. Curiositystream Inc’s price-to-book ratio is lower than its industry median ratio of 1.72. This could make Curiositystream Inc more attractive to investors looking for a new addition to their portfolio.

Dingdong (Cayman) Ltd (ADR)’s Value Grade

Value Grade:

Dingdong (Cayman) Ltd is a China-based e-commerce company. The Company offers groceries and other daily necessities directly delivered to users and households. The Company’s groceries offerings include fresh produce, meat and seafood and other daily necessities. The Company procure its products primarily from direct upstream sources such as farms and cooperatives. The Company’s frontline fulfillment grid consists of more than 950 frontline fulfillment stations across 29 cities in China. Its frontline fulfillment grid is also supported by approximately 40 regional processing centers to sort, package, label and store raw products prior to fulfillment.

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.

Dingdong (Cayman) Ltd (ADR) has a Value Score of 68, which is considered to be undervalued.

Dingdong (Cayman) Ltd (ADR)’s price-to-book ratio is lower than its peers. This could make Dingdong (Cayman) Ltd (ADR) more attractive for value investors when compared to the industry median at 1.72.

You can read more about Dingdong (Cayman) Ltd (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.

Enthusiast Gaming Holdings Inc’s Value Grade

Value Grade:

Enthusiast Gaming Holdings Inc. is a Canada-based integrated gaming entertainment company. The Company’s principal business activities are comprised of media and content, and entertainment and esports. The Company’s digital media platform includes approximately 100+ gaming related Websites, 1,000 YouTube channels and a library of over 1,500 casual games. The Company operates its esports division through its subsidiary, Luminosity Gaming Inc. Esports division is a global esports franchise, which consists of approximately seven professional esports teams under ownership and management, including the Vancouver Titans Overwatch team and the Seattle Surge Call of Duty team. The Company’s entertainment business owns and operates Canada’s gaming expo, Enthusiast Gaming Live Expo and EGLX, and the mobile gaming event in Europe, Pocket Gamer Connects. Its subsidiaries include Aquilini GameCo Inc., Hexagon Games Corp., Enthusiast Gaming (PG) Inc., Omnia Media Inc., Vedatis SAS and other.

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.

Enthusiast Gaming Holdings Inc has a Value Score of 73, which is considered to be undervalued.

Enthusiast Gaming Holdings Inc’s price-to-book ratio is higher than its peers. This could make Enthusiast Gaming Holdings Inc less attractive for value investors when compared to the industry median at 1.72.

You can read more about Enthusiast Gaming 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.

Lizhi Inc - ADR’s Value Grade

Value Grade:

Lizhi Inc is a holding company mainly engaged in operating a global audio ecosystem consisting of audio-based social networks, podcast content portfolios, and audio communities. The Company operates the online audio community through LIZHI Application (App), which is a one-stop online destination for users to create, store, share, discover and interact through audio on mobile and other smart devices. The Company provides podcast services mainly via two platforms, LIZHI App and LIZHI Podcast. The users can access the App on their mobile devices and in-car audio products to listen to an abundance of audio content. The Company’s Audio Content covers a wide array of categories, generated by its users or selected paid podcasts, providing innovative audio and artificial intelligence technologies to connect with each other. The Company also sells virtual gifts to users to pay for selected audio entertainment and the podcast and also provides advertising services.

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.

Lizhi Inc - ADR has a Value Score of 91, which is considered to be undervalued.

Lizhi Inc - ADR’s price-earnings ratio is 4.3 compared to the industry median at 21.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Lizhi Inc - ADR more attractive for value investors.

Lizhi Inc - ADR’s price-to-book ratio is higher than its peers. This could make Lizhi Inc - ADR less attractive for value investors when compared to the industry median at 1.72.

You can read more about Lizhi 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.

Outbrain Inc’s Value Grade

Value Grade:

Outbrain Inc. is a recommendation platform powering the open Web. The Company’s technology provides personalization, engagement and monetization solutions to digital media properties, including many publishers. The Company provides media partners with a platform that encompasses data at scale, as well as prediction and recommendation capabilities, helping media partners, deliver a discovery feed personalized to their users, based on context and each user’s interests and preferences. Its platform is built for user engagement. Its advertisers use platforms to reach consumers through various advertisement (ad) formats across digital media properties around the world. Its platform provides access to a volume of ad inventory within the content feeds of its digital media properties. Advertisers primarily use its platform for performance-driven campaigns, with measurable outcomes. Its subsidiaries include Outbrain Israel Ltd., Outbrain UK Limited, Outbrain Italy SRL and Outbrain Spain S.L.

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.

Outbrain Inc has a Value Score of 61, which is considered to be undervalued.

Outbrain Inc’s price-to-book ratio is higher than its peers. This could make Outbrain Inc less attractive for value investors when compared to the industry median at 1.72.

You can read more about Outbrain 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.

Rakuten Group Inc - ADR’s Value Grade

Value Grade:

Rakuten, Inc. is a Japan-based company mainly engaged in the Internet service business, the FinTech business and the mobile business. The Company operates through three business segments. The Internet Service segment is mainly engaged in the operation of Internet shopping mall Rakuten Market site and other electronic commerce (EC) sites, online cashback sites, travel reservation sites, portal sites and digital content sites, the sale of advertisements on the sites, as well as the operation of professional sports facilities. The FinTech segment is mainly engaged in the provision of banking and securities services via the Internet, credit cards related services, life insurance services, insurance services and electronic money services. The Mobile segment is mainly engaged in the provision of communication services and messaging services.

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.

Rakuten Group Inc - ADR has a Value Score of 79, which is considered to be undervalued.

Rakuten Group Inc - ADR’s price-to-book ratio is higher than its peers. This could make Rakuten Group Inc - ADR less attractive for value investors when compared to the industry median at 1.72.

You can read more about Rakuten 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.

TrueCar Inc’s Value Grade

Value Grade:

TrueCar, Inc. is an automotive digital marketplace that enables car buyers to connect to Company's network of certified dealers. It offers a software ecosystem on a common technology infrastructure, powered by data and analytics. Its Company-branded platform is available on its TrueCar Website and mobile applications. Its network of TrueCar Certified Dealers consists primarily of new car franchises, representing all various makes of cars, as well as independent dealers selling used vehicles. Key elements of its core leads-based consumer experience include Research & Discovery, New Car Build Experience, Used Car Inventory Search, Vehicle Identification Numbers (VIN) Offers, TrueCar Deal Builder, and Finance and Insurance Features. Its network of TrueCar Certified Dealers interfaces with its platform primarily through its Dealer Portal, an application that can be accessed online or using a mobile device. TrueCar Certified Dealers operate in all 50 states and the District of Columbia.

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.

TrueCar Inc has a Value Score of 90, which is considered to be undervalued.

TrueCar Inc’s price-to-book ratio is higher than its peers. This could make TrueCar Inc less attractive for value investors when compared to the industry median at 1.72.

You can read more about TrueCar 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 Online 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 Online Services stocks as well as other industrys.

Choosing Which of the 7 Best Online 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.

• Curiositystream Inc stock has a Value Grade of B.
• Dingdong (Cayman) Ltd (ADR) stock has a Value Grade of B.
• Enthusiast Gaming Holdings Inc stock has a Value Grade of B.
• Lizhi Inc - ADR stock has a Value Grade of A.
• Outbrain Inc stock has a Value Grade of B.
• Rakuten Group Inc - ADR stock has a Value Grade of B.
• TrueCar Inc stock has a Value Grade of A.

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

Want to learn more about Online 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.

• 7 Undervalued Online Services Stocks for Friday, March 10
• Which Is a Better Investment, ACV Auctions Inc or Bilibili Inc - ADR Stock?
• Which Is a Better Investment, ACV Auctions Inc or Doximity Inc Stock?
• Which Is a Better Investment, ACV Auctions Inc or Duolingo Inc Stock?

AAII Disclaimer

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