Investors with an interest in Internet - Services stocks have likely encountered both Lyft (LYFT) 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 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.
Right now, Lyft is sporting a Zacks Rank of #2 (Buy), while Shopify has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that LYFT likely has seen a stronger improvement to its earnings outlook than SHOP has recently. But this is only part of the picture 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.
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.
LYFT currently has a forward P/E ratio of 11.64, while SHOP has a forward P/E of 77.61. We also note that LYFT has a PEG ratio of 0.48. 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 3.14.
Another notable valuation metric for LYFT is its P/B ratio of 12.29. 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 14.31.
Based on these metrics and many more, LYFT holds a Value grade of B, while SHOP has a Value grade of F.
LYFT has seen stronger estimate revision activity and sports more attractive valuation metrics than SHOP, so it seems like value investors will conclude that LYFT is the superior 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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