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

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 is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, KE Holdings Inc. Sponsored ADR has a Zacks Rank of #1 (Strong Buy), while Shopify has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BEKE has an improving earnings outlook. However, value investors will care about much more than just this.

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.

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.

BEKE currently has a forward P/E ratio of 16.96, while SHOP has a forward P/E of 81.10. We also note that BEKE has a PEG ratio of 0.57. 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 2.40.

Another notable valuation metric for BEKE is its P/B ratio of 2.12. 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 15.54.

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

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

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This article originally published on Zacks Investment Research (zacks.com).

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