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

Zacks Equity Research
Updated
Northern Trust (NTRS) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Investors looking for stocks in the Internet - Services sector might want to consider either YAHOO JAPAN CP (YAHOY) or Shopify (SHOP). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

YAHOO JAPAN CP has a Zacks Rank of #2 (Buy), while Shopify has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that YAHOY likely has seen a stronger improvement to its earnings outlook than SHOP has recently. But this is just one piece of the puzzle for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

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The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

YAHOY currently has a forward P/E ratio of 18.30, while SHOP has a forward P/E of 603.36. We also note that YAHOY has a PEG ratio of 1.22. 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 24.13.

Another notable valuation metric for YAHOY is its P/B ratio of 1.93. 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 8.36.

Based on these metrics and many more, YAHOY holds a Value grade of B, while SHOP has a Value grade of F.

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


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YAHOO JAPAN CP (YAHOY) : Free Stock Analysis Report
 
Shopify Inc. (SHOP) : Free Stock Analysis Report
 
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Zacks Investment Research