In this article:
Investors with an interest in Internet - Services stocks have likely encountered both Lyft (LYFT) and Shopify (SHOP). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.
Lyft has a Zacks Rank of #2 (Buy), while Shopify has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that LYFT is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
LYFT currently has a forward P/E ratio of 12.76, while SHOP has a forward P/E of 77.40. We also note that LYFT has a PEG ratio of 0.28. 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 1.82.
Another notable valuation metric for LYFT is its P/B ratio of 8.50. 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 14.87.
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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Lyft, Inc. (LYFT) : Free Stock Analysis Report
Shopify Inc. (SHOP) : Free Stock Analysis Report