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

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Investors interested in Internet - Services stocks are likely familiar with Baidu Inc. (BIDU - Free Report) and 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.

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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Baidu Inc. has a Zacks Rank of #1 (Strong Buy), while Shopify has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BIDU has an improving earnings outlook. However, value investors will care about much more than just this.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

BIDU currently has a forward P/E ratio of 9.38, while SHOP has a forward P/E of 70.16. We also note that BIDU has a PEG ratio of 2.24. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. SHOP currently has a PEG ratio of 3.06.

Another notable valuation metric for BIDU is its P/B ratio of 0.88. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, SHOP has a P/B of 11.67.

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

BIDU has seen stronger estimate revision activity and sports more attractive valuation metrics than SHOP, so it seems like value investors will conclude that BIDU is the superior option right now.


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