Shopify (SHOP) vs. The Competition Critical Review

Shopify (NASDAQ:SHOP) is one of 271 publicly-traded companies in the “IT Services” industry, but how does it contrast to its peers? We will compare Shopify to similar companies based on the strength of its dividends, analyst recommendations, risk, profitability, institutional ownership, earnings and valuation.

Earnings & Valuation

This table compares Shopify and its peers gross revenue, earnings per share and valuation.

	Gross Revenue	Net Income	Price/Earnings Ratio
Shopify	$11.56 billion	$1.23 billion	90.80
Shopify Competitors	$3.24 billion	$227.67 million	-23.83

Shopify has higher revenue and earnings than its peers. Shopify is trading at a higher price-to-earnings ratio than its peers, indicating that it is currently more expensive than other companies in its industry.

Institutional & Insider Ownership

69.3% of Shopify shares are held by institutional investors. Comparatively, 36.7% of shares of all “IT Services” companies are held by institutional investors. 20.4% of shares of all “IT Services” companies are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Volatility & Risk

Shopify has a beta of 2.65, indicating that its share price is 165% more volatile than the S&P 500. Comparatively, Shopify’s peers have a beta of 2.15, indicating that their average share price is 115% more volatile than the S&P 500.

Profitability

This table compares Shopify and its peers’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Shopify	14.53%	12.58%	10.94%
Shopify Competitors	-191.23%	-32.13%	-8.65%

Analyst Ratings

This is a breakdown of recent ratings for Shopify and its peers, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Shopify	0	10	38	1	2.82
Shopify Competitors	1992	5654	9471	342	2.47

Shopify currently has a consensus target price of $178.82, indicating a potential upside of 20.09%. As a group, “IT Services” companies have a potential upside of 31.29%. Given Shopify’s peers higher probable upside, analysts clearly believe Shopify has less favorable growth aspects than its peers.

Summary

Shopify beats its peers on 11 of the 13 factors compared.

Shopify Company Profile

Shopify Inc., a commerce company, provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, Australia, China, and Latin America. The company’s platform enables merchants to displays, manages, markets, and sells its products through various sales channels, including web and mobile storefronts, physical retail locations, pop-up shops, social media storefronts, native mobile apps, buy buttons, and marketplaces; and enables to manage products and inventory, process orders and payments, fulfill and ship orders, new buyers and build customer relationships, source products, leverage analytics and reporting, manage cash, payments and transactions, and access financing. It also sells custom themes and apps, and registration of domain names; and merchant solutions, which include accepting payments, shipping, and securing working capital. The company was formerly known as Jaded Pixel Technologies Inc. and changed its name to Shopify Inc. in November 2011. Shopify Inc. was incorporated in 2004 and is headquartered in Ottawa, Canada.