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YAHOY vs. SHOP: Which Stock Should Value Investors Buy Now?

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Investors interested in Internet - Services stocks are likely familiar with YAHOO JAPAN CP (YAHOY - Free Report) and Shopify (SHOP - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, YAHOO JAPAN CP has a Zacks Rank of #2 (Buy), while Shopify has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that YAHOY is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

YAHOY currently has a forward P/E ratio of 17.11, while SHOP has a forward P/E of 501.91. We also note that YAHOY has a PEG ratio of 1.14. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. SHOP currently has a PEG ratio of 21.21.

Another notable valuation metric for YAHOY is its P/B ratio of 1.78. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, SHOP has a P/B of 16.23.

These metrics, and several others, help YAHOY earn a Value grade of A, while SHOP has been given a Value grade of F.

YAHOY is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that YAHOY is likely the superior value option right now.


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