Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 6 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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6 Undervalued Online Services Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 6 undervalued stocks in the Online Services industry for Tuesday, March 14, 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.

Cango Inc - ADR’s Value Grade

Value Grade:

Cango Inc. provides an automotive transaction service platform, which connects dealers, financial institutions, car buyers and other industry participants. The Company’s services primarily consist of automotive financing facilitation, automotive transaction facilitation and after-market services facilitation. It offers integrated solutions that support the life cycle of automotive financing transactions, including credit origination, credit assessment, credit servicing and delinquent asset management services. It provides additional services, including car sourcing and logistics and warehousing support for dealers and facilitation of car purchases for car buyers. The Company’s also facilitates after-market services to car buyers, which is comprised of facilitating the sale of insurance policies from insurance brokers or companies. The products offered through its platform are personal accident insurances and automotive insurances.

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.

Cango Inc - ADR has a Value Score of 100, which is considered to be undervalued.

When you look at Cango Inc - ADR’s price-to-sales ratio at 0.22 compared to the industry median at 1.27, this company has a lower price relative to revenue compared to its peers. This could make Cango 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. Cango Inc - ADR’s shareholder yield is higher than its industry median ratio of (2.51%). 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. Cango Inc - ADR’s price-to-book ratio is lower than its industry median ratio of 1.57. This could make Cango Inc - ADR more attractive to investors looking for a new addition to their portfolio.

Engine Gaming and Media Inc’s Value Grade

Value Grade:

Engine Gaming and Media, Inc. is a Canada-based gaming, media and influencer marketing platform company. The Company provides live streaming data and social analytics, influencer relationship management and monetization, and programmatic advertising to support video gaming companies, brand marketers, ecommerce companies, media publishers and agencies. Its segments include Gaming, Media, and Corporate and Other. Its Gaming segment offers services related to competitive organized video gaming or sporting events. Its Media segment offers platform and advertising services provided to other broadcasters, primarily local television (TV) and radio broadcasters. Its subsidiaries include Stream Hatchet, which is engaged in gaming video distribution analytics; Sideqik, which is a social influencer marketing discovery, analytics, and activation platform, and Frankly Media, which is a digital publishing platform used to create, distribute, and monetize content across all digital channels.

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.

Engine Gaming and Media Inc has a Value Score of 66, which is considered to be undervalued.

Engine Gaming and Media Inc’s price-to-book ratio is higher than its peers. This could make Engine Gaming and Media Inc less attractive for value investors when compared to the industry median at 1.57.

You can read more about Engine Gaming and Media 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.

Paltalk Inc’s Value Grade

Value Grade:

Paltalk, Inc. is engaged in providing communications software. The Company operates a network of consumer applications that creates a social media enterprise where users can meet, see, chat, broadcast, play online games and message in real time in a secure environment with others in its network. Its product portfolio includes Paltalk, Camfrog and Tinychat, which together host a collection of video-based communities. Tinychat enables adaptations of its video technology for use in alternative markets, focused on a younger demographic user base. Its other product, Vumber, is a telecommunications services provider that enables users to communicate privately by having multiple phone numbers with any area code through which calls can be forwarded to a user’s existing telephone number. Vumber provides a data analytics platform that can track, record and analyze calls to gain new insights into one’s business. Vumber serves both the retail and small business community.

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.

Paltalk Inc has a Value Score of 73, which is considered to be undervalued.

Paltalk Inc’s price-to-book ratio is higher than its peers. This could make Paltalk Inc less attractive for value investors when compared to the industry median at 1.57.

You can read more about Paltalk 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 78, 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 1.57.

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.

Skillz Inc’s Value Grade

Value Grade:

Skillz Inc. (Skillz) operates a mobile e-sports platform. The Company's principal activities are to develop and support an online-hosted technology platform that enables independent game developers to host tournaments and provide competitive gaming activity (competitions) to end-users worldwide. Its live operations (LiveOps) system is used to manage and optimize the user experience across the thousands of games on its platform. Its platform provides monetization services to game developers, enabling them to offer competitive games to its end-users. Its end-to-end technology platform enables mobile game developers to improve gameplay experiences and drive improved engagement, retention and revenue from their content. It offers an integrated software development kit (SDK), which contains over 200 features, including various social features, such as in-game chat, friends, tournaments and leagues which allow players to interact and build relationships in the player community.

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.

Skillz Inc has a Value Score of 72, which is considered to be undervalued.

Skillz Inc’s price-to-book ratio is higher than its peers. This could make Skillz Inc less attractive for value investors when compared to the industry median at 1.57.

You can read more about Skillz 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.

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 91, 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 1.57.

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 6 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.

• Cango Inc - ADR stock has a Value Grade of A.
• Engine Gaming and Media Inc stock has a Value Grade of B.
• Paltalk Inc stock has a Value Grade of B.
• Rakuten Group Inc - ADR stock has a Value Grade of B.
• Skillz Inc 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 6 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.

• 6 Undervalued Online Services Stocks for Tuesday, March 14
• Which Is a Better Investment, Bumble Inc or Match Group Inc Stock?
• Which Is a Better Investment, Match Group Inc or Weibo Corp (ADR) Stock?
• 3 Undervalued Online Services Stocks for Monday, March 13

AAII Disclaimer

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