Data Analytics Stocks Offer Deepest Value in Software Sector, Analysis Finds

The data analytics subsector of the software market currently presents the most compelling valuation case for investors, trading at a significant discount to both infrastructure software and business application SaaS peers. An analysis by Investing.com of 191 U.S.-listed software firms with market caps over $2 billion reveals clear valuation gaps between the industry's primary segments.

Data Analytics Emerges as Value Leader

According to the analysis, data analytics stocks appear to be the most undervalued group, a trend attributed to market fears surrounding the ad-tech industry and the potential for AI to disrupt existing business models. This subsector trades at an average price-to-sales (P/S) multiple of approximately 2.0x and an average enterprise value to EBITDA (EV/EBITDA) multiple of around 8x.

These multiples are significantly lower than those of other software categories. The analysis highlighted several companies with notable valuation metrics, including:

• The Trade Desk (TTD): Trading at 8.1x EV/EBITDA despite a year-to-date performance decline of -60.6%.
• Teradata (TDC): Valued at 1.5x P/S and 6.6x EV/EBITDA.
• DoubleVerify (DV): Valued at 2.7x P/S and 13.8x EV/EBITDA.

Infrastructure and SaaS Command Higher Premiums

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In contrast, infrastructure software and Software-as-a-Service (SaaS) business applications carry richer valuations. Infrastructure software, known for its reliable cash flows, has seen its multiples hold up better, resulting in what the analysis calls "thinner relative value."

This segment trades at an average P/S of ~3.4x and an EV/EBITDA of ~11x. The SaaS application group, which includes high-profile names like Salesforce and Zoom, is priced highest of all, with an average P/S of ~4.7x and an EV/EBITDA of ~17x. One standout in the SaaS category was Adobe (ADBE), which the analysis noted as having the group's lowest EV/EBITDA multiple at 10.4x following a recent sell-off.

Market Perspective and Risks

The valuation disparity is stark: data analytics stocks are trading at P/S multiples less than half those of SaaS companies, with a nearly 50% discount on an EV/EBITDA basis. The analysis suggests that investor fears over AI commoditizing data processing have been aggressively priced into stocks like TTD and Teradata.

However, this lower valuation comes with a key risk. The bear case, as noted in the source, is that if AI genuinely diminishes the value of existing data processing and measurement platforms, then the current low multiples may be justified. For investors seeking a more defensive profile, infrastructure software's mission-critical nature may offer a more stable alternative.