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 IT Services & Consulting 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.

Latest IT Services & Consulting Stock News

Before choosing which top IT Services & Consulting stock to buy, be sure to conduct proper due diligence: analyze various financial metrics and look at historical data, public statements and news coverage.

The fundamental outlook for the IT Services and Consulting sub-industry for the next 12 months is positive. Client demand for highly sought after for highly sought-after services such as custom-built integrations are expected to grow strongly in 2022.  Geopolitical impacts from the Russia-Ukraine are expected to be more isolated in nature across the industry. Companies with a significant number of employees in Russia and Ukraine have been hit hard as fears around an inability to deliver consulting, engineering, and integration services remain a key risk. Conversely, for companies with employees spread across several regions, incremental revenue opportunities exist as clients in more impacted areas plan for contingencies if a worst-case scenario occurs. Revenues are expected to increase 18.1% and adjusted earnings per share 20.2% in 2022, driven by increased digital spending as opposed to spending on traditional projects. Headcount utilization and attrition levels will be key areas to watch throughout 2022 as underperformance could be driven by inability to source talent. The S&P 1500 IT Consulting Services Index is down 14.8% through April 1, 2022, compared to 4.6% from the S&P 1500. Much of the underperformance is attributed to outliers with significant exposure to the recent series of geopolitical events. For reference, the sub-industry index rose 35% in 2021, topping the S&P 1500 gain of 26.7% during the same timeframe.

Why Focus on Undervalued IT Services & Consulting 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 IT Services & Consulting 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 IT Services & Consulting industry for Friday, May 05, 2023. Let’s take a closer look at their individual scores to see how they measure up against each other and the IT Services & Consulting 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.

DXC Technology Co’s Value Grade

Value Grade:

DXC Technology Company is a global information technology (IT) services company. The Company helps global companies run their mission-critical systems and operations while modernizing IT, optimizing data architectures, and ensuring security and scalability across public, private and hybrid clouds. Its segments include Global Business Services (GBS) and Global Infrastructure Services (GIS). The GBS segment provides technology solutions that help its customers address their business challenges and accelerate transformations adjusted to each customers industry and specific objectives. GBS offerings include analytics and engineering, applications, and business process services. The GIS segment provides a portfolio of technology offerings that deliver predictable outcomes and measurable results while reducing business risk and operational costs for customers. GIS offerings include cloud and security, IT outsourcing (ITO) and modern workplaces.

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.

DXC Technology Co has a Value Score of 93, which is considered to be undervalued.

When you look at DXC Technology Co’s price-to-sales ratio at 0.34 compared to the industry median at 1.68, this company has a lower price relative to revenue compared to its peers. This could make DXC Technology Co’s stock more attractive for value investors.

DXC Technology Co’s price-earnings ratio is 7.58 compared to the industry median at 23.66. This means it has a lower share price relative to earnings compared to its peers. This could make DXC Technology Co more attractive for value investors.

Now, let’s assess DXC Technology Co’s EV/EBITDA ratio, also known as enterprise multiple. At 2.5, when compared to the industry median of 12.9, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

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. DXC Technology Co’s shareholder yield is higher than its industry median ratio of (1.02%). 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. DXC Technology Co’s price-to-book ratio is lower than its industry median ratio of 2.27. This could make DXC Technology Co more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at DXC Technology Co’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. DXC Technology Co’s price-to-free-cash-flow ratio is lower than its industry median ratio of 22.17. This could make DXC Technology Co more attractive because the lower P/FCF ratio indicates that DXC Technology Co is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

LivePerson Inc’s Value Grade

Value Grade:

LivePerson, Inc. is a conversational artificial intelligence (AI) company. The Company operates through two segments: Business and Consumer. The Business segment enables brands to leverage the Conversational Cloud?s intelligence engine to connect with consumers through an integrated suite of mobile and online business messaging technologies. The Consumer segment facilitates online transactions between experts and users seeking information and knowledge for a fee via mobile and online messaging. Its business solutions offerings include The Conversational Cloud, LivePerson?s Conversational AI, WildHealth, e-Bot7, Tenfold, and VoiceBase. Its consumer services offering is an online marketplace that connects experts who provide information and knowledge for a fee via mobile and online messaging with users. The Company?s mobile and online messaging solutions are targeted at business executives whose primary responsibility is optimization of customer care, sales, and marketing.

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.

LivePerson Inc has a Value Score of 68, which is considered to be undervalued.

LivePerson Inc’s price-to-book ratio is lower than its peers. This could make LivePerson Inc more attractive for value investors when compared to the industry median at 2.27.

You can read more about LivePerson 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.

Nukkleus Inc’s Value Grade

Value Grade:

Nukkleus Inc. is a financial technology company, which is focused on providing software and technology solutions for the worldwide retail foreign exchange trading industry. The Company has two segments. General support services segment provides software, technology, customer sales and marketing and risk management technology hardware and software solutions package under a general services agreement to a related party. Financial services segment provides financial services to enable conversion of fiat currencies to cryptocurrencies and vice versa. It provides services in the various service categories, including introducing broker dealer network and the introducing broker interface, Chinese and Middle East customer desk support, bridging software to the meta trader platforms, forex market liquidity access, turnkey risk management support software and risk management team, front end software retail trading platforms and customer application systems, and back-office systems management.

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.

Nukkleus Inc has a Value Score of 94, which is considered to be undervalued.

Nukkleus Inc’s price-to-book ratio is higher than its peers. This could make Nukkleus Inc less attractive for value investors when compared to the industry median at 2.27.

You can read more about Nukkleus 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.

Uphealth Inc’s Value Grade

Value Grade:

UpHealth, Inc. is a healthcare technology and technology-enabled service company. The Company operates through three segments: Integrated Care Management, Virtual Care Infrastructure, and Services. The Integrated Care Management segment provides guidance and tools to enhance population health through its SyntraNet platform. This platform improves overall health system performance by leveraging capabilities in data and analytics, health information exchanges, pharmacy care services, health care operations, and population health. The Virtual Care Management leverages digital health tools, technology, data, and analytics to provide telehealth solutions, which use electronic information and telecommunications technologies to support and promote long-distance clinical health care, patient and professional health-related education, and virtual care infrastructure solutions. The Services platform provides behavioral health, mental health, and pharmacy services in the United States.

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.

Uphealth Inc has a Value Score of 71, which is considered to be undervalued.

Uphealth Inc’s price-to-book ratio is higher than its peers. This could make Uphealth Inc less attractive for value investors when compared to the industry median at 2.27.

You can read more about Uphealth 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 IT Services & Consulting 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 IT Services & Consulting stocks as well as other industrys.

Choosing Which of the 4 Best IT Services & Consulting 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.

• DXC Technology Co stock has a Value Grade of A.
• LivePerson Inc stock has a Value Grade of B.
• Nukkleus Inc stock has a Value Grade of A.
• Uphealth Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 4 undervalued stocks in the IT Services & Consulting 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 IT Services & Consulting Stocks

Want to learn more about IT Services & Consulting 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 IT Services & Consulting Stocks for Friday, May 05
• Which Is a Better Investment, CGI Inc or Manhattan Associates Inc Stock?
• 5 Undervalued IT Services & Consulting Stocks for Thursday, May 04
• Why ASGN Inc’s (ASGN) Stock Is Down 5.02%

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