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 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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6 Undervalued Software 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 Software industry for Tuesday, September 05, 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 80, which is considered to be undervalued.

When you look at AdTheorent Holding Company Inc’s price-to-sales ratio at 0.74 compared to the industry median at 3.75, 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 7.84 compared to the industry median at 43.35. 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 6.3, when compared to the industry median of 23.8, 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 lower than its industry median ratio of (2.28%). 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 3.57. This could make AdTheorent Holding Company Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at AdTheorent Holding Company Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. AdTheorent Holding Company Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 33.01. This could make AdTheorent Holding Company Inc more attractive because the lower P/FCF ratio indicates that AdTheorent Holding Company 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.

Agent Information Software Inc’s Value Grade

Value Grade:

Agent Information Software, Inc., through its wholly owned subsidiaries Auto Graphics, Inc. and A-G Canada, Ltd., provides software products and services used to create, manage, publish and access information content via the Internet/Web. Auto Graphics, Inc. provides software products and services to customers in the library community and publishing markets throughout the United States. A-G Canada Ltd. provides software products and services to customers in the library community in Canada. The Company’s products include VERSO, SHAREit, MONTAGE and RESEARCHit. The VERSO Integrated Library System (ILS) allows library to select and pay for only the services needed. SHAREit is an online-based resource sharing platform. MONTAGE is a cloud-based digital collection solution. RESEARCHit is a federated search solution, that allows researchers to search a range of e-content resources and yield a common de-duplicated result set.

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 81, which is considered to be undervalued.

Agent Information Software Inc’s price-earnings ratio is 15.1 compared to the industry median at 43.4. 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 3.57.

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.

Cue Health Inc’s Value Grade

Value Grade:

Cue Health Inc. is a healthcare technology company. The Company is engaged in providing individuals with a connected diagnostic platform that bridges the physical and virtual care continuum. Its platform, Cue Integrated Care Platform, which consists of hardware, software and diagnostic components: the Cue Health Monitoring System, which is made up of a portable, durable and reusable reader, or Cue Reader, a single-use test cartridge, or Cue Cartridge, and a sample collection wand, or Cue Wand; Cue Data and Innovation Layer, with cloud-based data and analytics capability; Cue Virtual Care Delivery Apps, including its app and Cue Enterprise Dashboard, and its Cue Ecosystem Integrations and apps, which allow for integrations with third party applications and sensors. Its products include Cue Reader, COVID-19 Test, Cue Test Kits, Cue Care, and Cue+ Membership. It offers solutions for home/personal, business, public sector, healthcare, retail pharmacies, entertainment and education sectors.

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.

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

Cue Health Inc’s price-to-book ratio is higher than its peers. This could make Cue Health Inc less attractive for value investors when compared to the industry median at 3.57.

You can read more about Cue Health 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.

Infobird Co Ltd’s Value Grade

Value Grade:

Infobird Co Ltd is a China-based holding company mainly engaged in providing software-as-a-service (SaaS) and innovative artificial intelligence (AI) powered products. The Company mainly uses self-developed cloud computing structure, AI and machine learning capabilities, patented Voice over Internet Protocol or VoIP application technologies, and no-code development platform, providing standard and customized customer relationship management cloud-based services, and business process outsourcing (BPO) services to its clients at all stages of the sales process. The Company also offers AI-powered cloud-based sales force management software including intelligent quality inspection and intelligent training software to help its clients monitor, benchmark and improve the performances of agents.

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.

Infobird Co Ltd has a Value Score of 82, which is considered to be undervalued.

Infobird Co Ltd’s price-to-book ratio is higher than its peers. This could make Infobird Co Ltd less attractive for value investors when compared to the industry median at 3.57.

You can read more about Infobird Co 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.

ON24 Inc’s Value Grade

Value Grade:

ON24, Inc. is providing a cloud-based digital engagement platform that enables businesses to convert customer engagement into revenue through interactive webinar experiences, virtual event experiences and multimedia content experiences. The Company's platform?s portfolio of interactive and personalized digital experience products creates and captures actionable, real-time data from professionals every month to provide businesses with buying signals and behavioral insights to convert prospects into customers. Its portfolio of ON24 Experience products include ON24 Elite, a live, interactive webinar experience; ON24 Forum, a live, interactive experience that facilitates video-to-video interaction between presenters and audiences; ON24 Engagement Hub, an always-on, rich multimedia content experience, and ON24 Target, a personalized and curated, rich multimedia content experience. Its ON24 Experience products are backed by its solutions, including ON24 Intelligence and ON24 Connect.

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.

ON24 Inc has a Value Score of 63, which is considered to be undervalued.

ON24 Inc’s price-to-book ratio is higher than its peers. This could make ON24 Inc less attractive for value investors when compared to the industry median at 3.57.

You can read more about ON24 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.

Scienjoy Holding Corp’s Value Grade

Value Grade:

Scienjoy Holding Corp, formerly Wealthbridge Acquisition Ltd, is a Hong Kong-based company mainly engages in the provision of show live streaming video entertainment social platform. The Company mainly operates online live streaming websites and mobile applications under the brand name of Showself, Lehai, and Haixiu.

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.

Scienjoy Holding Corp has a Value Score of 66, which is considered to be undervalued.

Scienjoy Holding Corp’s price-earnings ratio is 7.8 compared to the industry median at 43.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Scienjoy Holding Corp more attractive for value investors.

Scienjoy Holding Corp’s price-to-book ratio is higher than its peers. This could make Scienjoy Holding Corp less attractive for value investors when compared to the industry median at 3.57.

You can read more about Scienjoy Holding 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 6 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 A.
• Cue Health Inc stock has a Value Grade of A.
• Infobird Co Ltd stock has a Value Grade of A.
• ON24 Inc stock has a Value Grade of B.
• Scienjoy Holding Corp stock has a Value Grade of B.

Now that you have a bit more background about each of the 6 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.

• 6 Undervalued Software Stocks for Tuesday, September 05
• 6 Undervalued Software Stocks for Monday, September 04
• What You Need to Know About Box Inc's Q2 Earnings
• What You Need to Know About Elastic NV's Q1 Earnings

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.