AKAM or SHOP: Which Is the Better Value Stock Right Now?

Zacks Equity Research
·2 mins read

Investors interested in Internet - Services stocks are likely familiar with Akamai Technologies (AKAM) and Shopify (SHOP). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Akamai Technologies and Shopify are both sporting a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. However, value investors will care about much more than just this.

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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

AKAM currently has a forward P/E ratio of 22.10, while SHOP has a forward P/E of 1,642.98. We also note that AKAM has a PEG ratio of 1.79. 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 50.55.

Another notable valuation metric for AKAM is its P/B ratio of 4.70. 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 27.44.

Based on these metrics and many more, AKAM holds a Value grade of B, while SHOP has a Value grade of F.

Both AKAM and SHOP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that AKAM is the superior value option right now.


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