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 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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6 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 6 undervalued stocks in the IT Services & Consulting industry for Friday, October 06, 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.

Alithya Group inc’s Value Grade

Value Grade:

Alithya Group inc. is a Canada-based company, which advises on strategy and digital transformation with professionals in Canada, the United States and internationally. It offers consulting and digital technology services to clients in the financial services, insurance, healthcare, government, renewable energy, manufacturing, telecommunications, transportation and logistics, and professional services sectors. Its segments include business strategy, business applications implementation, application services, data and analytics and digital skilling and change enablement. Business Strategy segment helps in decision-making processes regarding strategic consulting, digital transformation, business agility, enterprise architecture, organizational performance and others. Business Applications Implementation segment helps clients deploy company-wide systems, including enterprise resource planning, enterprise performance management, customer relationship management and human capital 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.

Alithya Group inc has a Value Score of 67, which is considered to be undervalued.

When you look at Alithya Group inc’s price-to-sales ratio at 0.29 compared to the industry median at 1.47, this company has a lower price relative to revenue compared to its peers. This could make Alithya Group inc’s stock more attractive for value investors.

Now, let’s assess Alithya Group inc’s EV/EBITDA ratio, also known as enterprise multiple. At 19.3, when compared to the industry median of 13.1, the company may be considered overvalued 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. Alithya Group inc’s shareholder yield is lower than its industry median ratio of (1.28%). 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. Alithya Group inc’s price-to-book ratio is lower than its industry median ratio of 2.18. This could make Alithya Group inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Alithya Group inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Alithya Group inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 22.25. This could make Alithya Group inc more attractive because the lower P/FCF ratio indicates that Alithya Group 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.

CLPS Inc’s Value Grade

Value Grade:

CLPS Incorporation is a China-based holding company principally engaged in the provision of information technology (IT), consulting and solution services. The Company is focused on delivering services to global institutions in banking, insurance and financial sectors, both in China and globally. The Company conducts its businesses mainly through three segments, including Fintech IT Consulting Service segment, Customized IT Solution Service segment and Other segment. The Company’s consulting services include credit card services and core banking services. It offers IT consulting services across various credit card business areas, including credit card applications, account setup, authorization and activation, settlement, collection, promotion, point system, anti-fraud, statement, reporting and risk management. The Company conducts its businesses in domestic and overseas markets.

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.

CLPS Inc has a Value Score of 79, which is considered to be undervalued.

CLPS Inc’s price-to-book ratio is higher than its peers. This could make CLPS Inc less attractive for value investors when compared to the industry median at 2.18.

You can read more about CLPS 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.

Formula Systems 1985 Ltd (ADR)’s Value Grade

Value Grade:

Formula Systems (1985) Ltd. (Formula) is a global information technology (IT) solutions and services holding company. The Company, through its directly held subsidiary and affiliated companies, is engaged in providing software solutions and services, software product marketing and support, computer infrastructure and integration solutions, and learning and integration. The Company operates through two segments: software services and IT professional services. The software services segment develops markets, sells and supports an application platform, software applications, business and process integration solutions, and related services. The IT professional services segment offers IT services in the areas of infrastructure design and delivery, application development, technology planning and implementation services, communications services and solutions, as well as supplemental outsourcing 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.

Formula Systems 1985 Ltd (ADR) has a Value Score of 61, which is considered to be undervalued.

Formula Systems 1985 Ltd (ADR)’s price-earnings ratio is 17.6 compared to the industry median at 24.8. This means that it has a lower price relative to its earnings compared to its peers. This makes Formula Systems 1985 Ltd (ADR) more attractive for value investors.

Formula Systems 1985 Ltd (ADR)’s price-to-book ratio is higher than its peers. This could make Formula Systems 1985 Ltd (ADR) less attractive for value investors when compared to the industry median at 2.18.

You can read more about Formula Systems 1985 Ltd (ADR)’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.

TDCX Inc (ADR)’s Value Grade

Value Grade:

TDCX Inc. is a Singapore-based company, which is a provider of digital customer experience solutions. The Company?s service offerings include omnichannel CX solutions, sales and digital marketing services, and content, trust and safety services. It also offers services consisting of miscellaneous activities, such as providing workspaces to existing clients and providing human resource and administration services to clients. It helps its clients manage their relationships by providing digital customer experiences solutions, such as after-sales service and customer support. Its sales and digital marketing services help its clients market their products and services to their customers in both the business-to-consumer (B2C) and the business-to-business (B2B) markets. Its content, trust and safety services comprise content monitoring and moderation services, trust and safety services and data annotation 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.

TDCX Inc (ADR) has a Value Score of 61, which is considered to be undervalued.

TDCX Inc (ADR)’s price-earnings ratio is 10.0 compared to the industry median at 24.8. This means that it has a lower price relative to its earnings compared to its peers. This makes TDCX Inc (ADR) more attractive for value investors.

TDCX Inc (ADR)’s price-to-book ratio is higher than its peers. This could make TDCX Inc (ADR) less attractive for value investors when compared to the industry median at 2.18.

You can read more about TDCX Inc (ADR)’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.

Telus International Cda Inc’s Value Grade

Value Grade:

TELUS International (Cda) Inc. is a customer experience (CX) innovator that designs, builds and delivers high-tech, high-touch digital solutions, including artificial intelligence (AI) and content moderation for global brands. The Company operates through its subsidiary TELUS Corporation, a communications and information technology company. The Company offers a range of solutions, such as digital experience, customer experience, information technology (IT) lifecycle, advisory services, trust, safety and security, and back office and automation. The Company serves technology, games, communications & media, ecommerce, financial technology and financial services, healthcare, travel & hospitality and automotive. The Company provides scalable data annotation services for text, images, videos and audio. The Company sources multilingual training data in approximately 500 languages. The Company is also a full-service digital product provider through WillowTree.

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.

Telus International Cda Inc has a Value Score of 72, which is considered to be undervalued.

Telus International Cda Inc’s price-earnings ratio is 14.7 compared to the industry median at 24.8. This means that it has a lower price relative to its earnings compared to its peers. This makes Telus International Cda Inc more attractive for value investors.

Telus International Cda Inc’s price-to-book ratio is higher than its peers. This could make Telus International Cda Inc less attractive for value investors when compared to the industry median at 2.18.

You can read more about Telus International Cda 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.

TSR Inc’s Value Grade

Value Grade:

TSR, Inc. is a staffing company, which is focused on recruiting Information Technology (IT) professionals for short- and long-term assignments, permanent placements, project work and providing contract computer programming services to its customers. The Company provides its customers with technical computer personnel to supplement their in-house IT capabilities. Its contract computer programming services involve the provision of technical staff to customers to meet the specialized requirements of their IT operations. The Company has staffing capabilities in the areas of application development in .net and java, mobile applications for Android and IOS platforms, project management, IT security specialists, cloud development and architecture, business analysts, UI design and development, network infrastructure and support and database development and administration. The Company also provides contract administrative (non-IT) workers to support IT 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.

TSR Inc has a Value Score of 86, which is considered to be undervalued.

TSR Inc’s price-earnings ratio is 11.0 compared to the industry median at 24.8. This means that it has a lower price relative to its earnings compared to its peers. This makes TSR Inc more attractive for value investors.

TSR Inc’s price-to-book ratio is higher than its peers. This could make TSR Inc less attractive for value investors when compared to the industry median at 2.18.

You can read more about TSR 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 6 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.

• Alithya Group inc stock has a Value Grade of B.
• CLPS Inc stock has a Value Grade of B.
• Formula Systems 1985 Ltd (ADR) stock has a Value Grade of B.
• TDCX Inc (ADR) stock has a Value Grade of B.
• Telus International Cda Inc stock has a Value Grade of B.
• TSR Inc stock has a Value Grade of A.

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

• 6 Undervalued IT Services & Consulting Stocks for Friday, October 06
• 7 Undervalued IT Services & Consulting Stocks for Thursday, October 05
• Why Adeia Inc’s (ADEA) Stock Is Down 6.79%
• Why Fastly Inc’s (FSLY) Stock Is Down 13.64%

AAII Disclaimer

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