Shopify SHOP
What does Shopify do?
Shopify operates a Canadian commerce platform that allows merchants of any size to build an online store and manage their business. The software covers product and inventory management, order fulfillment, shipping, customer relationships, analytics and reporting. Sales take place through web stores, mobile apps, physical shops, social networks and marketplaces, so merchants can manage multiple sales channels centrally.
The company earns money partly from recurring subscription fees for the platform and partly from merchant solutions. These mainly include Shopify Payments, an integrated payment service, as well as shipping, financing and other add-on services that share in merchants' sales. Competitively, Shopify faces other store-builder tools, enterprise software and large marketplaces. Its strengths are a broad ecosystem of apps and partners, ease of use and the close integration of software and payment processing.
Score profile
Rank vs. Software - Application (71 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Shopify ranks in the middle in the group Software - Application (4.9/10). On growth, the company ranks among the best in the group Software - Application (8.7/10). On valuation (higher = cheaper), the stock ranks in the bottom fifth in the group Software - Application (1.3/10). On financial strength, Shopify ranks above average in the group Software - Application (6.6/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 59.8x | 18.0x | better than 2 % |
| Trailing P/E | 89.9x | 32.7x | better than 8 % |
| PEG ratio | 1.7x | 1.4x | better than 40 % |
| EV/EBITDA | 73.8x | 19.7x | better than 4 % |
| Price/sales | 13.3x | 4.4x | better than 5 % |
| Price/book | 14.8x | 5.5x | better than 12 % |
| Revenue growth | 31.6% | 10.8% | better than 94 % |
| Earnings growth | 79.5% | 9.4% | better than 81 % |
| Gross margin | 47.5% | 71.8% | better than 11 % |
| Operating margin | 18.4% | 15.7% | better than 67 % |
| Net margin | 15.0% | 12.3% | better than 60 % |
| Return on equity | 16.8% | 13.2% | better than 57 % |
| Debt/equity | 1.5% | 46.9% | better than 91 % |
| Current ratio | 4.9x | 1.2x | better than 98 % |
| Free cash flow yield | 0.9% | 5.3% | better than 11 % |
| Dividend yield | 0.0% | 1.1% | – |
| Payout ratio | 0.0% | 31.2% | – |
| Beta | 2.66 | 0.96 | – |
Valuation: what is Shopify worth?
For Shopify the data currently does not allow a reliable model range (e.g. negative free cash flow or missing comparables). In this case the Pro analysis assesses the valuation qualitatively.
49 analysts, average rating “Buy”, average price target 177.49 USD (+21.1%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- The trading volume of merchants on the platform largely determines revenue from payments and sales-based services.
- The number of active merchants and their move to higher-tier plans support recurring subscription revenue.
- The expansion of payment, shipping and financing solutions increases revenue per merchant and loyalty to the platform.
Risks
- Consumer restraint and weaker online retail reduce trading volume and thus directly affect sales-based revenue.
- Strong competition from platform providers, marketplaces and payment service providers can create price pressure and cost market share.
- Payment services bring regulatory obligations, fraud risks and dependence on partners and payment networks.
What to look for with Shopify
Gross merchandise volume (GMV) is particularly informative, as it reflects merchants' sales and thus largely determines payment and service revenue.