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This Stock Is Highly Correlated to Shopify and Is a Better Value Buy!


Shopify Inc (TSX:SHOP)(NYSE:SHOP) has been one of the hottest stock on the markets this year. However, with no earnings and a price-to-book multiple of more than 16, investors are paying a steep price for the stock and are at risk for significant corrections if the markets turn south. Shopify could be due for a big sell-off and that’s why it might not be the best buy to make today.

One stock that could be a good alternative is Air Canada (TSX:AC), which as you can see from the chart below, has achieved similar results:

Unlike Shopify, Air Canada has a profit and trades at a very reasonable 16 times earnings and three times its book value. And with rival WestJet now going private, it may become even more valuable for investors that want a good airline stock to diversify their portfolios with. As long as the Canadian economy is doing well, air travel will be popular for not only businesses but travellers going on vacations as well.

And so while the stock has performed well, there’s still a lot of potential upside left. With oil prices remaining relatively low, the airline should still be able to produce strong profits going forward. For the past year, Shopify and Air Canada’s share prices have seen a correlation of 0.81, which is very strong. And given they’re likely driven by similar factors – a strong economy – it may not be that surprising. But if you’re not wanting to pay a big premium for Shopify shares, Air Canada could be a great option as it’s achieved significant growth and it comes at much less risk.

DISCLAIMER: The author of this article does not hold any shares of the stock. This article is not a substitute for financial advice and this is not intended to persuade investors to buy or sell the stock(s) mentioned. Investors are recommended to seek professional investment advice or do their own analysis before making a stock purchase.