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 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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4 Undervalued Software 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 Software industry for Thursday, March 23, 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.

Blend Labs Inc’s Value Grade

Value Grade:

Blend Labs, Inc. provides a cloud-based software platform for financial services firms that is designed to control the end-to-end consumer journey for any banking product. The Company operates through two segments: Blend Platform and Title365. The Blend Platform segment is a software platform that powers the digital interface between financial services firms and consumers. Title365 segment is an underwritten title insurance agency that is engaged in selling title insurance policies and escrow services throughout the United States. Title365 segment with its software platform enables financial services firms to automate title commitments and streamline communication with consumers and settlement teams. The Company offers products, including mortgages, home equity, vehicle loans, personal loans, credit cards and deposit accounts. The Company’s range of financial providers includes banks, credit unions and financial technology.

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.

Blend Labs Inc has a Value Score of 82, which is considered to be undervalued.

When you look at Blend Labs Inc’s price-to-sales ratio at 0.92 compared to the industry median at 3.72, this company has a lower price relative to revenue compared to its peers. This could make Blend Labs 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. Blend Labs Inc’s shareholder yield is higher than its industry median ratio of (2.03%). 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. Blend Labs Inc’s price-to-book ratio is lower than its industry median ratio of 3.32. This could make Blend Labs Inc 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 98, 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.

Movella Holdings Inc’s Value Grade

Value Grade:

Movella Holdings Inc. is a full-stack provider of integrated sensors, software, and analytics that enable the digitization of movement. The Company powers real-time character movement in digital environments, transforms movement into digital data that provides actionable insights, renders digitized movement to enable the creation of sophisticated and animated content, creates new forms of monetizable intellectual property (IP) with biomechanical digital content, and provides spatial movement orientation and positioning data. It offers full-stack product portfolio includes differentiated sensor fusion modules, motion capture systems, visualization software, and artificial intelligence (AI) cloud analytics enabled by its technologies. The Company?s sensors and software are used by global motion picture studios, video game publishers and virtual creators for three-dimensional (3D) character animation, and other applications, such as virtual concerts.

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.

Movella Holdings Inc has a Value Score of 95, which is considered to be undervalued.

Movella Holdings Inc’s price-earnings ratio is 4.1 compared to the industry median at 38.7. This means that it has a lower price relative to its earnings compared to its peers. This makes Movella Holdings Inc more attractive for value investors.

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

You can read more about Movella 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.

Telos Corp’s Value Grade

Value Grade:

Telos Corporation is a provider of cyber, cloud and enterprise security solutions. The Company operates through two segments: Security Solutions and Secure Networks. The Security Solutions segment focuses on cybersecurity, cloud and identity solutions through Xacta, Telos Ghost, Automated Message Handling System (AMHS) and Telos ID offerings. The Secure Networks segment provides secure networking architectures and solutions to its customers through secure mobility solutions and network management and defense services. The Secure Networks segment has its capabilities, which include network design, operations, and sustainment; system integration and engineering; network security and compliance; deployable comms; innovation and digital transformation; service desk; defensive cyber operations, and program management. Its customer base consists of the United States (U.S.) federal government, large commercial businesses, state and local governments, and international customers.

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.

Telos Corp has a Value Score of 80, which is considered to be undervalued.

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

You can read more about Telos Corp’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 4 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.

• Blend Labs Inc stock has a Value Grade of A.
• Healthcare Triangle Inc stock has a Value Grade of A.
• Movella Holdings Inc stock has a Value Grade of A.
• Telos Corp stock has a Value Grade of B.

Now that you have a bit more background about each of the 4 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.

• 4 Undervalued Software Stocks for Thursday, March 23
• 5 Undervalued Software Stocks for Wednesday, March 22
• Three Cybersecurity Stocks to Consider as Cyberattacks Persist
• Which Is a Better Investment, Aspen Technology Inc or Open Text Corp (USA) 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.