Shopify (NYSE:SHOP) & 2U (NASDAQ:TWOU) Critical Review

2U (NASDAQ:TWOU) and Shopify (NYSE:SHOP) are both computer and technology companies, but which is the superior stock? We will contrast the two businesses based on the strength of their institutional ownership, earnings, profitability, risk, analyst recommendations, valuation and dividends.

Profitability

This table compares 2U and Shopify’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
2U	-35.13%	-9.97%	-1.69%
Shopify	1.87%	4.48%	3.52%

Volatility and Risk

2U has a beta of 0.93, indicating that its stock price is 7% less volatile than the S&P 500. Comparatively, Shopify has a beta of 2.2, indicating that its stock price is 120% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and price targets for 2U and Shopify, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
2U	0	8	1	0	2.11
Shopify	2	17	17	0	2.42

2U currently has a consensus price target of $4.31, indicating a potential upside of 1,167.97%. Shopify has a consensus price target of $79.00, indicating a potential upside of 6.10%. Given 2U’s higher possible upside, analysts plainly believe 2U is more favorable than Shopify.

Insider and Institutional Ownership

80.5% of 2U shares are held by institutional investors. Comparatively, 69.3% of Shopify shares are held by institutional investors. 3.7% of 2U shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares 2U and Shopify’s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
2U	$945.95 million	0.03	-$317.61 million	($3.91)	-0.09
Shopify	$7.06 billion	13.57	$132.00 million	$0.09	827.43

Shopify has higher revenue and earnings than 2U. 2U is trading at a lower price-to-earnings ratio than Shopify, indicating that it is currently the more affordable of the two stocks.

Summary

Shopify beats 2U on 11 of the 14 factors compared between the two stocks.

About 2U

2U, Inc. operates as an online education platform company in the United States and internationally. The company operates through two segments, Degree Program and Alternative Credential. The Degree Program segment provides the technology and services to nonprofit colleges and universities to enable the online delivery of degree programs. This segment targets students seeking an undergraduate or graduate degree. The Alternative Credential segment offers online open courses, executive education programs, technical, skills-based boot camps, and micro-credential programs through nonprofit colleges and universities, and other organizations. This segment targets students seeking to reskill or upskill for career or personal development through shorter duration and lower-priced offerings. It provides a platform that provides technology and technology-enabled services; and edX.org, a marketplace that allows to access various catalog of online offerings, which include free offerings and graduate degrees. The company was formerly known as 2Tor Inc. and changed its name to 2U, Inc. in October 2012. 2U, Inc. was incorporated in 2008 and is headquartered in Lanham, Maryland.

About Shopify

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.