Investors interested in Internet - Services stocks are likely familiar with Akamai Technologies (AKAM) and 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Akamai Technologies 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 AKAM has an improving earnings outlook. But this is just one factor that value investors are interested in.
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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
AKAM currently has a forward P/E ratio of 12.77, while SHOP has a forward P/E of 101.52. We also note that AKAM has a PEG ratio of 2.14. 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 4.11.
Another notable valuation metric for AKAM is its P/B ratio of 2.7. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, SHOP has a P/B of 15.38.
Based on these metrics and many more, AKAM holds a Value grade of B, while SHOP has a Value grade of F.
AKAM 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 AKAM is likely the superior value option right now.
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Akamai Technologies, Inc. (AKAM): Free Stock Analysis Report Shopify Inc. (SHOP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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