Investors looking for stocks in the Internet - Services sector might want to consider either Internet Initiative Japan (IIJI - Free Report) or Shopify (SHOP - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Internet Initiative Japan and Shopify are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that IIJI's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
IIJI currently has a forward P/E ratio of 26.22, while SHOP has a forward P/E of 483.54. We also note that IIJI has a PEG ratio of 1.94. 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 19.34.
Another notable valuation metric for IIJI is its P/B ratio of 1.60. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, SHOP has a P/B of 9.61.
These metrics, and several others, help IIJI earn a Value grade of A, while SHOP has been given a Value grade of F.
IIJI has seen stronger estimate revision activity and sports more attractive valuation metrics than SHOP, so it seems like value investors will conclude that IIJI is the superior option right now.