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YY vs. SHOP: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors interested in stocks from the Internet - Services sector have probably already heard of JOYY (YY) and Shopify (SHOP). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, JOYY is sporting a Zacks Rank of #1 (Strong Buy), while Shopify has a Zacks Rank of #3 (Hold). This means that YY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.

YY currently has a forward P/E ratio of 14.55, while SHOP has a forward P/E of 531.58. We also note that YY has a PEG ratio of 2.38. 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 21.26.

Another notable valuation metric for YY is its P/B ratio of 1. 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 18.61.

These are just a few of the metrics contributing to YY's Value grade of B and SHOP's Value grade of F.

YY stands above SHOP thanks to its solid earnings outlook, and based on these valuation figures, we also feel that YY is the superior value option right now.


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