It hasn't been a great afternoon session for Shopify investors, who have watched their shares sink by -3.1% to a price of $105.78. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
Shopify's Valuation Is in Line With Its Sector Averages:
Shopify Inc., a commerce technology company, provides tools to start, scale, market, and run a business of various sizes in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, and Latin America. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 30.44 and an average price to book (P/B) ratio of 4.19. In contrast, Shopify has a trailing 12 month P/E ratio of 86.0 and a P/B ratio of 12.41.
Shopify has moved 61.4% over the last year compared to 11.3% for the S&P 500 — a difference of 50.1%. Shopify has a 52 week high of $129.38 and a 52 week low of $48.56.
Generally Positive Cash Flows but Slimmer Gross Margins than the Industry Average of 63.49%:
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $1,578 | $2,929 | $4,612 | $5,600 | $7,060 | $8,880 |
| Gross Margins | 55% | 53% | 54% | 49% | 50% | 50% |
| Net Margins | -8% | 11% | 63% | -62% | 2% | 23% |
| Net Income (M) | -$125 | $320 | $2,915 | -$3,460 | $132 | $2,019 |
| Net Interest Expense (M) | $48 | $23 | $15 | $75 | $241 | $308 |
| Depreciation & Amort. (M) | $17 | $38 | $42 | $36 | $28 | $22 |
| Diluted Shares (M) | 113 | 123 | 1,274 | 1,266 | 1,296 | 1,302 |
| Earnings Per Share | -$1.1 | $2.59 | $2.29 | -$2.73 | $0.1 | $1.55 |
| EPS Growth | n/a | 335.4545454545454% | -11.583011583011576% | -219.2139737991266% | 103.66300366300368% | 1449.9999999999998% |
| Free Cash Flow (M) | $14 | $383 | $485 | -$186 | $905 | $1,597 |
| CAPEX (M) | $57 | $42 | $51 | $50 | $39 | $19 |
| Current Ratio | 8.67 | 15.69 | 12.15 | 7.07 | 6.99 | 3.71 |
Shopify has generally positive cash flows and an excellent current ratio of 3.71. Additionally, the company's financial statements display rapidly growing revenues and decreasing reinvestment in the business and a strong EPS growth trend. However, the firm has slimmer gross margins than its peers.
