Investors with an interest in Internet - Services stocks have likely encountered both YAHOO JAPAN CP (YAHOY - Free Report) and Shopify (SHOP - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.
YAHOO JAPAN CP and Shopify are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that YAHOY likely has seen a stronger improvement to its earnings outlook than SHOP has recently. 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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
YAHOY currently has a forward P/E ratio of 19.08, while SHOP has a forward P/E of 800.23. We also note that YAHOY has a PEG ratio of 1.27. 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 32.01.
Another notable valuation metric for YAHOY is its P/B ratio of 2.19. 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 10.42.
These are just a few of the metrics contributing to YAHOY's Value grade of B and SHOP's Value grade of F.
YAHOY has seen stronger estimate revision activity and sports more attractive valuation metrics than SHOP, so it seems like value investors will conclude that YAHOY is the superior option right now.