Investors with an interest in Internet - Services stocks have likely encountered both Lyft (LYFT) and 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, Lyft has a Zacks Rank of #2 (Buy), while Shopify has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that LYFT has an improving earnings outlook. 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.
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.
LYFT currently has a forward P/E ratio of 19.16, while SHOP has a forward P/E of 105.07. We also note that LYFT has a PEG ratio of 1.03. 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 5.33.
Another notable valuation metric for LYFT is its P/B ratio of 12.69. 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 16.22.
These metrics, and several others, help LYFT earn a Value grade of B, while SHOP has been given a Value grade of F.
LYFT 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 LYFT is likely the superior value option right now.
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Lyft, Inc. (LYFT): Free Stock Analysis Report Shopify Inc. (SHOP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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