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 Monday, July 17, 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.

Conduent Inc’s Value Grade

Value Grade:

Conduent Incorporated is engaged in delivering technology-led business process solutions for businesses and governments globally. Its segments include Commercial, Government, and Transportation. The Commercial segment provides business process services and customized solutions to clients in a variety of commercial industries. The Government segment provides government-centric business process services to United States federal, state, local and foreign governments for public assistance, health services, program administration, transaction processing and payment services. The Transportation segment provides systems, support, and revenue-generating solutions to government transportation agency clients. Its technology-led solutions and services include customer experience management, business operations solutions, healthcare claims and administration solutions and human capital solutions. It also offers a full range of omni-channel customer contact services and customer communications.

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.

Conduent Inc has a Value Score of 81, which is considered to be undervalued.

When you look at Conduent Inc’s price-to-sales ratio at 0.21 compared to the industry median at 1.74, this company has a lower price relative to revenue compared to its peers. This could make Conduent Inc’s stock more attractive for value investors.

Now, let’s assess Conduent Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 4.5, when compared to the industry median of 14.5, 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. Conduent Inc’s shareholder yield is lower than its industry median ratio of (1.11%). 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. Conduent Inc’s price-to-book ratio is lower than its industry median ratio of 2.63. This could make Conduent Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Conduent Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Conduent Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 23.98. This could make Conduent Inc more attractive because the lower P/FCF ratio indicates that Conduent Inc 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.

Synchronoss Technologies Inc’s Value Grade

Value Grade:

Synchronoss Technologies, Inc. is a provider of white-label cloud, messaging, digital, and network management solutions. It enables its customers to keep subscribers, systems, networks and content in sync. The Company?s core products include EngageX, OnboardingX and NetworkX. EngageX?s product includes a personal cloud that backup, manages and engages with content; advanced messaging that has multi-channel messaging, peer-to-peer communications and application-to-person commerce solutions, and an e-mail suite that has white-label consumer e-mail solutions. OnboardingX product includes backup and restores that backup, view and restore subscriber content across operating systems and devices; out of box experience that streamlines the activation of new services and devices, and content transfer that move content between mobile devices. NetworkX product includes an integrated application suite that designs, procures, manages and optimizes telecommunication network infrastructure.

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.

Synchronoss Technologies Inc has a Value Score of 77, which is considered to be undervalued.

Synchronoss Technologies Inc’s price-to-book ratio is higher than its peers. This could make Synchronoss Technologies Inc less attractive for value investors when compared to the industry median at 2.63.

You can read more about Synchronoss Technologies 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.

VirnetX Holding Corporation’s Value Grade

Value Grade:

VirnetX Holding Corporation is an Internet security software and technology company with patented technology for Zero Trust Network Access (ZTNA) based secure network communications. The Company's software and technology solutions, including its Secure Domain Name Registry and Technology, VirnetX One, War Room, VirnetX Matrix, and Gabriel Connection Technology, are designed to facilitate secure communications and to create a secure environment for real-time communication applications, such as cloud computing, instant messaging and Voice over Internet Protocol (VoIP). VirnetX One is a security-as-a-service platform that protects enterprise applications, services, and infrastructure from cyberattacks. War Room software product provides a secure video conferencing meeting environment where sensitive communications and data are invisible to those not authorized to view it. VirnetX Matrix product provides security for Internet-enabled enterprise applications and their connected devices.

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.

VirnetX Holding Corporation has a Value Score of 92, which is considered to be undervalued.

VirnetX Holding Corporation’s price-to-book ratio is higher than its peers. This could make VirnetX Holding Corporation less attractive for value investors when compared to the industry median at 2.63.

You can read more about VirnetX Holding 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.

Xunlei Ltd’s Value Grade

Value Grade:

Xunlei Limited is a China-based innovator in shared cloud computing and blockchain technology. The Company operates an Internet platform in China based on cloud computing to enable users to access, manage and consume digital media content. The Company's acceleration products and services include Xunlei Accelerator, which enables users to accelerate digital transmission over the Internet, and cloud acceleration subscription services, which offer user services for speed and reliability. The Company's Xunlei Accelerator allows users to accelerate digital transmission over the Internet. Xunlei Accelerator also bridges users with diverse needs to other services it offers, such as Xunlei Media Player, which supports both online and offline video watching, and its various online games, including Web games and massively multiplayer online games (MMOGs), by recommending and providing links to these services on its user interface.

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.

Xunlei Ltd has a Value Score of 98, which is considered to be undervalued.

Xunlei Ltd’s price-earnings ratio is 7.9 compared to the industry median at 26.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Xunlei Ltd more attractive for value investors.

Xunlei Ltd’s price-to-book ratio is higher than its peers. This could make Xunlei Ltd less attractive for value investors when compared to the industry median at 2.63.

You can read more about Xunlei Ltd’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.

• Conduent Inc stock has a Value Grade of A.
• Synchronoss Technologies Inc stock has a Value Grade of B.
• VirnetX Holding Corporation stock has a Value Grade of A.
• Xunlei Ltd stock has a Value Grade of A.

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 Monday, July 17
• Which Is a Better Investment, Accenture Plc or Applovin Corp Stock?
• Which Is a Better Investment, Akamai Technologies, Inc. or Applovin Corp Stock?
• Which Is a Better Investment, Applovin Corp or Amdocs Limited Stock?

AAII Disclaimer

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