Investors looking for stocks in the Internet - Services sector might want to consider either Akamai Technologies (AKAM - 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.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Akamai Technologies has a Zacks Rank of #2 (Buy), while Shopify has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that AKAM likely has seen a stronger improvement to its earnings outlook than SHOP has recently. But this is only part of the picture 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.
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.
AKAM currently has a forward P/E ratio of 19.18, while SHOP has a forward P/E of 1,895.52. We also note that AKAM has a PEG ratio of 1.60. 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 75.82.
Another notable valuation metric for AKAM is its P/B ratio of 3.97. 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 15.87.
These metrics, and several others, help AKAM earn a Value grade of B, while SHOP has been given a Value grade of F.
AKAM 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 AKAM is likely the superior value option right now.