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BIDU vs. SHOP: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors interested in stocks from the Internet - Services sector have probably already heard of Baidu Inc. (BIDU) and Shopify (SHOP). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, Baidu Inc. has a Zacks Rank of #2 (Buy), while Shopify has a Zacks Rank of #3 (Hold). This means that BIDU's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.

BIDU currently has a forward P/E ratio of 20.82, while SHOP has a forward P/E of 522.44. We also note that BIDU has a PEG ratio of 7.53. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. SHOP currently has a PEG ratio of 22.07.

Another notable valuation metric for BIDU is its P/B ratio of 1.47. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, SHOP has a P/B of 16.85.

These metrics, and several others, help BIDU earn a Value grade of B, while SHOP has been given a Value grade of F.

BIDU sticks out from SHOP in both our Zacks Rank and Style Scores models, so value investors will likely feel that BIDU is the better option right now.


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