HSTM vs. SHOP: Which Stock Is the Better Value Option?
Investors with an interest in Internet - Services stocks have likely encountered both HealthStream (HSTM) and Shopify (SHOP). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
HealthStream and Shopify are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that HSTM is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
HSTM currently has a forward P/E ratio of 46.42, while SHOP has a forward P/E of 438.76. We also note that HSTM has a PEG ratio of 3.87. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. SHOP currently has a PEG ratio of 13.50.
Another notable valuation metric for HSTM is its P/B ratio of 1.84. 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 28.09.
These metrics, and several others, help HSTM earn a Value grade of B, while SHOP has been given a Value grade of F.
HSTM is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that HSTM is likely the superior value option right now.
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HealthStream, Inc. (HSTM): Free Stock Analysis Report
Shopify Inc. (SHOP): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.