Why Shopify Stock Bounded Higher on Wednesday

Shares of Shopify (NASDAQ: SHOP) charged sharply higher on Wednesday, climbing as much as 6.4%. As of 1:59 p.m. ET, the stock was still up 5.7%.

While the broader market updraft likely helped fuel its ascent, the e-commerce platform provider announced it was adding a new tool to help merchants succeed.

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Automated tax filing

Shopify announced a partnership with compliance specialist Sovos to launch Shopify Tax automated filing, a new tool that simplifies the preparation and submission of sales tax returns for Shopify users. This new feature is available immediately to eligible merchants in the U.S.

The Sales and Use Tax Filing solution is integrated deeply into Shopify's systems, helping create and submit sales tax returns. This significantly reduces the amount of time needed to manage sales tax compliance, while also helping to minimize the risk of an audit.

A one-stop SHOP

One of the biggest attractions for Shopify merchants is having all the tools they need to simplify running their business right at their fingertips. Shopify offers a wide range of these tools, helping entrepreneurs build websites, automate marketing, manage inventory, handle shipping and logistics, and accept and process payments.

There's a lot for investors to like as well. In the first quarter, revenue rose 27% year over year, while free cash flow jumped 56%. Excluding the changes in the value of its equity investments, Shopify's net income climbed 56%. Finally, the company's consistent performance has fueled stock price gains of 236% over the past three years.

Shopify currently sells for 94 times earnings and 16 times sales, but this fails to account for the company's consistent growth. Using the more appropriate price-to-earnings growth (PEG) ratio, which factors in that growth, results in a multiple of 0.04 -- when any number less than 1 is the standard for an undervalued stock.

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Danny Vena has positions in Shopify. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.