Investors with an interest in Internet - Services stocks have likely encountered both KE Holdings Inc. Sponsored ADR (BEKE) 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
KE Holdings Inc. Sponsored ADR and Shopify are both sporting a Zacks Rank of #1 (Strong 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. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
BEKE currently has a forward P/E ratio of 14.98, while SHOP has a forward P/E of 90.32. We also note that BEKE has a PEG ratio of 0.50. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. SHOP currently has a PEG ratio of 2.73.
Another notable valuation metric for BEKE is its P/B ratio of 2.07. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, SHOP has a P/B of 17.39.
These metrics, and several others, help BEKE earn a Value grade of B, while SHOP has been given a Value grade of F.
Both BEKE and SHOP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BEKE is the superior value option right now.
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KE Holdings Inc. Sponsored ADR (BEKE): Free Stock Analysis Report
Shopify Inc. (SHOP): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).