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BIDU vs. SHOP: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Internet - Services sector might want to consider either Baidu Inc. (BIDU - Free Report) or Shopify (SHOP - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Baidu Inc. has a Zacks Rank of #1 (Strong Buy), while Shopify has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BIDU is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

BIDU currently has a forward P/E ratio of 11.16, while SHOP has a forward P/E of 756.89. We also note that BIDU has a PEG ratio of 0.58. 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 56.91.

Another notable valuation metric for BIDU is its P/B ratio of 1.34. 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 7.18.

These are just a few of the metrics contributing to BIDU's Value grade of B and SHOP's Value grade of F.

BIDU sticks out from SHOP in both our Zacks Rank and Style Scores models, so value investors will likely feel that BIDU is the better option right now.


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