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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 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, Baidu Inc. has a Zacks Rank of #1 (Strong Buy), while Shopify has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BIDU is likely seeing its earnings outlook improve to a greater extent. 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.

BIDU currently has a forward P/E ratio of 21.19, while SHOP has a forward P/E of 1,201.19. We also note that BIDU has a PEG ratio of 9.35. 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 48.05.

Another notable valuation metric for BIDU is its P/B ratio of 1.60. 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 12.61.

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

BIDU has seen stronger estimate revision activity and sports more attractive valuation metrics than SHOP, so it seems like value investors will conclude that BIDU is the superior option right now.


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