Shopify shares fell by -2.6% during the day's afternoon session, and are now trading at a price of $112.11. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
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 91.1 and a P/B ratio of 13.16.
Shopify has moved 74.6% over the last year compared to 11.2% for the S&P 500 — a difference of 63.4%. 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.
