Investors looking for stocks in the Internet - Services sector might want to consider either Rakuten, Inc. (RKUNY) or Shopify (SHOP). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Rakuten, Inc. has a Zacks Rank of #2 (Buy), while Shopify has a Zacks Rank of #5 (Strong Sell). This means that RKUNY'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 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.
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.
RKUNY currently has a forward P/E ratio of 22.93, while SHOP has a forward P/E of 463.79. We also note that RKUNY has a PEG ratio of 3.06. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. SHOP currently has a PEG ratio of 19.60.
Another notable valuation metric for RKUNY is its P/B ratio of 2.15. 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 10.74.
Based on these metrics and many more, RKUNY holds a Value grade of A, while SHOP has a Value grade of F.
RKUNY stands above SHOP thanks to its solid earnings outlook, and based on these valuation figures, we also feel that RKUNY is the superior value option right now.
Rakuten, Inc. (RKUNY): Free Stock Analysis Report
Shopify Inc. (SHOP): Free Stock Analysis Report
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