Investors with an interest in Internet - Services stocks have likely encountered both 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.
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 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, both Baidu Inc. and Shopify are sporting a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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 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 13.64, while SHOP has a forward P/E of 38,006.67. We also note that BIDU has a PEG ratio of 1.52. 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 1,470.56.
Another notable valuation metric for BIDU is its P/B ratio of 1.43. 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 24.83.
These are just a few of the metrics contributing to BIDU's Value grade of A and SHOP's Value grade of F.
Both BIDU and SHOP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BIDU is the superior value option right now.