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, May 11, 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.

AdTheorent Holding Company Inc’s Value Grade

Value Grade:

AdTheorent Holding Company, Inc. is a programmatic digital advertising company. It operates a digital media platform that focuses on performance-first, privacy-forward methods to execute programmatic digital advertising campaigns, serving both advertising agency and brand customers. It uses machine learning and advanced data science to organize, analyze, and operationalize non-sensitive data to deliver real-world value for customers. It builds custom machine-learning models for each campaign using historic and real-time data to predict future consumer conversion actions for every digital ad impression. The Company?s non-individualized attributes include publisher, content and uniform resource locator (URL), keywords, device make, device operating system and other device attributes, ad position, geographic data, weather, demographic signals, creative type, and size. The Company also offers customized vertical solutions to address the needs of advertisers in specialized industries.

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.

AdTheorent Holding Company Inc has a Value Score of 79, which is considered to be undervalued.

When you look at AdTheorent Holding Company Inc’s price-to-sales ratio at 0.73 compared to the industry median at 3.65, this company has a lower price relative to revenue compared to its peers. This could make AdTheorent Holding Company Inc’s stock more attractive for value investors.

AdTheorent Holding Company Inc’s price-earnings ratio is 5.06 compared to the industry median at 37.23. This means it has a lower share price relative to earnings compared to its peers. This could make AdTheorent Holding Company Inc more attractive for value investors.

Now, let’s assess AdTheorent Holding Company Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 7.7, when compared to the industry median of 21.8, 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. AdTheorent Holding Company Inc’s shareholder yield is higher than its industry median ratio of (1.82%). 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. AdTheorent Holding Company Inc’s price-to-book ratio is lower than its industry median ratio of 3.46. This could make AdTheorent Holding Company Inc more attractive to investors looking for a new addition to their portfolio.

Agent Information Software Inc’s Value Grade

Value Grade:

Agent Information Software, Inc. is engaged in providing software products and services used to create, manage, publish and access information content through the Internet/Web. The Company provides data automation solutions to customers across multiple industries. The Company offers software-as-a-service (SaaS) services, database subscriptions, and software maintenance and support contracts. The Company provides its services to a range of libraries, such as statewide systems, public, academic, school, special, and consortia. The Company's subsidiaries include Auto-Graphics, Inc., which provides software products and services to customers in the library community and publishing markets throughout the United States of America, and A-G Canada Ltd., which provides software products and services to customers in the library community in Canada. Its subsidiary also include Agent Legal, Inc.

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.

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

Agent Information Software Inc’s price-earnings ratio is 20.9 compared to the industry median at 37.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Agent Information Software Inc more attractive for value investors.

Agent Information Software Inc’s price-to-book ratio is higher than its peers. This could make Agent Information Software Inc less attractive for value investors when compared to the industry median at 3.46.

You can read more about Agent Information 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.

CareCloud Inc’s Value Grade

Value Grade:

CareCloud, Inc. is a healthcare information technology company. The Company provides a suite of cloud-based solutions and related business services, to healthcare providers, from small practices to enterprise medical groups, hospitals, and health systems throughout the United States. Its segments include Healthcare IT and Medical Practice Management. Healthcare IT segment includes revenue cycle management and other services. Medical Practice Management segment includes the management of three medical practices. Its technology-enabled business solutions include revenue cycle management; Cloud-based software; Digital health; and Healthcare IT professional services & staffing. Its software-as-a-service platforms include practice management (PM), electronic health record (EHR), business intelligence, telehealth, patient experience management (PXM), and others. Its Revenue Cycle Management services including end-to-end medical billing, eligibility, analytics, and related 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.

CareCloud Inc has a Value Score of 92, which is considered to be undervalued.

CareCloud Inc’s price-to-book ratio is higher than its peers. This could make CareCloud Inc less attractive for value investors when compared to the industry median at 3.46.

You can read more about CareCloud 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.

Ebix Inc’s Value Grade

Value Grade:

Ebix, Inc. is a provider of on-demand infrastructure software exchanges and e-commerce services to the insurance, financial, travel, cash remittance and healthcare industries. In the insurance sector, the Company?s main focus is to develop and deploy globally a variety of insurance and reinsurance exchanges on an on-demand basis using software-as-a-service (SaaS) enterprise solutions in the areas of customer relationship management (CRM), front-end and back-end systems, and outsourced administrative and risk compliance. The Company?s EbixCash Financial exchange portfolio of software and services consists of domestic and international money remittance, foreign exchange (Forex), travel, pre-paid gift cards, utility payments, and lending and wealth management in India and other primarily Southeast Asian markets. It operates India's airport Forex business, with operations in approximately 20 international airports, including Delhi, Mumbai, Hyderabad, Chennai and Kolkata.

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.

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

Ebix Inc’s price-earnings ratio is 7.7 compared to the industry median at 37.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Ebix Inc more attractive for value investors.

Ebix Inc’s price-to-book ratio is higher than its peers. This could make Ebix Inc less attractive for value investors when compared to the industry median at 3.46.

You can read more about Ebix 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.

Immersion Corporation’s Value Grade

Value Grade:

Immersion Corporation is a licensing company focused on the invention, acceleration, and scaling, through licensing, of haptic technologies. The Company's primary business is focused on the mobility, gaming, and automotive markets, including entertainment, virtual and augmented reality, and wearables, as well as residential, commercial, and industrial Internet of Things. It provides technology solutions for mobile, automotive, gaming, and consumer electronics. It offers patent licenses and assistance such as reference designs, prototypes and enablement services to automotive makers and suppliers. Its licensees include ALPS Alpine, Continental, Preh, Panasonic, Mobase Electronics, Nippon Seiki, Vishay Intertechnology, Tokai Rika and Lexmark. In additional, the Company has licensed its patents to third party gaming peripheral manufacturers and distributors for use in spinning mass and force feedback devices controllers, steering wheels and joysticks, to be used with PC platforms.

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.

Immersion Corporation has a Value Score of 61, which is considered to be undervalued.

Immersion Corporation’s price-earnings ratio is 7.5 compared to the industry median at 37.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Immersion Corporation more attractive for value investors.

Immersion Corporation’s price-to-book ratio is higher than its peers. This could make Immersion Corporation less attractive for value investors when compared to the industry median at 3.46.

You can read more about Immersion Corporation’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.

SeaChange International Inc’s Value Grade

Value Grade:

SeaChange International, Inc. provides video streaming, linear television (TV), and video advertising technology for operators, content owners, and broadcasters globally. The Company is engaged in the delivery of multiscreen, advertising and over-the-top (OTT) video management solutions. The Company?s software products and services facilitate the aggregation, licensing, management and distribution of video and advertising content for service providers, telecommunications companies, satellite operators, broadcasters and other content providers. Its technology enables operators, broadcasters, and content owners to launch and grow linear TV and direct-to-consumer streaming services to manage, curate, and monetize their content. It sells its software products and services worldwide, primarily to service providers, such as VIDAA USA Inc. and Liberty Global, plc; telecommunications companies, such as Verizon Communications, Inc., Frontier Communications Corporation and others.

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.

SeaChange International Inc has a Value Score of 70, which is considered to be undervalued.

SeaChange International Inc’s price-to-book ratio is higher than its peers. This could make SeaChange International Inc less attractive for value investors when compared to the industry median at 3.46.

You can read more about SeaChange International 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.

VIQ Solutions Inc’s Value Grade

Value Grade:

VIQ Solutions Inc. is a Canada-based company. The Company is engaged in providing technology and services for digital evidence capture, retrieval, and content management. Its modular software allows customers to easily integrate the platform at any stage of their organization's digitization, from the capture of digital content from video and audio devices through to online collaboration, mobility, data analytics, and integration with sensors, facial recognition and speech recognition. It also provides recording and transcription services directly to a variety of clients including medical, courtrooms, legislative assemblies, hearing rooms, inquiries and quasi-judicial clients in countries like Canada, the United Kingdom, the United States and Australia. It combines artificial intelligence (AI)-driven voice and video capture technology that manages digital content in security environments including legal, criminal justice, insurance, government, corporate finance and media.

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.

VIQ Solutions Inc has a Value Score of 76, which is considered to be undervalued.

VIQ Solutions Inc’s price-to-book ratio is higher than its peers. This could make VIQ Solutions Inc less attractive for value investors when compared to the industry median at 3.46.

You can read more about VIQ Solutions 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.

• AdTheorent Holding Company Inc stock has a Value Grade of B.
• Agent Information Software Inc stock has a Value Grade of B.
• CareCloud Inc stock has a Value Grade of A.
• Ebix Inc stock has a Value Grade of A.
• Immersion Corporation stock has a Value Grade of B.
• SeaChange International Inc stock has a Value Grade of B.
• VIQ Solutions 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, May 11
• 6 Undervalued Software Stocks for Wednesday, May 10
• Is Cyber App cCorp (CYRB) Stock a Good Investment?
• Why Amplitude Inc’s (AMPL) Stock Is Down 8.08%

AAII Disclaimer

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