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BIDU vs. SHOP: Which Stock Should Value Investors Buy Now?

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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 stocks presents investors with the better value opportunity right now? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.

Right now, Baidu Inc. is sporting a Zacks Rank of #2 (Buy), while Shopify has a Zacks Rank of #4 (Sell). This means that BIDU's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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 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.

BIDU currently has a forward P/E ratio of 12.59, while SHOP has a forward P/E of 2,272.73. We also note that BIDU has a PEG ratio of 1.26. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. SHOP currently has a PEG ratio of 87.94.

Another notable valuation metric for BIDU is its P/B ratio of 1.37. 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 16.45.

These metrics, and several others, help BIDU earn a Value grade of A, while SHOP has been given a Value grade of F.

BIDU sticks out from SHOP in both our Zacks Rank and Style Scores models, so value investors will likely feel that BIDU is the better option right now.


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