Investors with an interest in Internet - Services stocks have likely encountered both Internet Initiative Japan (IIJI - 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.
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.
Internet Initiative Japan has a Zacks Rank of #1 (Strong Buy), while Shopify has a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that IIJI 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 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.
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.
IIJI currently has a forward P/E ratio of 22.74, while SHOP has a forward P/E of 972.32. We also note that IIJI has a PEG ratio of 1.68. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. SHOP currently has a PEG ratio of 38.89.
Another notable valuation metric for IIJI is its P/B ratio of 1.34. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, SHOP has a P/B of 10.91.
Based on these metrics and many more, IIJI holds a Value grade of A, while SHOP has a Value grade of F.
IIJI 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 IIJI is likely the superior value option right now.