Uber Technologies (UBER 0.72%) and Lyft (LYFT -0.12%) have been longtime competitors in the ride-sharing space. They've done a great job revolutionizing the mature taxi industry through technology. Both made getting a ride faster, more convenient, and highly reliable.

How should investors decide which stock offers the better return opportunity? There are no shortcuts. It involves researching and understanding a company's prospects. Then, you can turn to the valuation.

After looking under the hood of each company, which one will emerge as the winner?

Image source: Getty Images.

Uber Technologies

Uber Technologies operates three segments: mobility, delivery, and freight. However, mobility (connecting customers with drivers) and delivery (consumers placing online orders at restaurants for pickup or delivery) account for most of Uber's revenue.

People still find its mobility and delivery options appealing to use. You can see that through certain key measures. Mobility's first-quarter gross bookings were $21.2 billion, up 13% year over year. And the number of trips grew 18%. During this period, delivery's gross bookings increased 15% to $20.4 billion.

This helped drive Uber's revenue 14% higher to $11.5 billion. The growth was an even more impressive 17% after removing foreign-currency translation effects. Uber reported a profit of $0.83 a diluted share versus a $0.32 loss a year ago.

Investors have been impressed with the company's performance, driving the stock price higher. Over the last year through May 16, the stock gained nearly 40%, easily outpacing the S&P 500's (^GSPC 0.09%) 12.4%. Uber's valuation became richer, too. The shares sell at a price-to-sales (P/S) ratio of 4.3 compared to 3.6 a year ago.

Lyft

Lyft generates most of its revenue from ride-sharing operations that connect drivers and passengers. Founded in 2012, the company reported its first profit last year. It earned $22.8 million in 2024, reversing a $340.3 million loss.

It has also been growing quickly, proving the market is large enough for two major companies. First-quarter gross bookings increased 13% to $4.2 billion. Importantly, the number of rides grew 16% to 218.4 million.

This resulted in better operating results. Revenue reached $1.5 billion, up 14%. And Lyft remained profitable, posting earnings per diluted share of $0.01 versus an $0.08 loss.

Despite this good news and a recent share price surge, Lyft's stock gained a scant 0.9% over the last year. Since the company's newly profitable, it seems more instructive to use the P/S ratio as a valuation metric. Lyft's stock has a P/S of 1.2, down a bit from a year ago when it was 1.3.

Which is the better investment choice?

The choice comes down to investing in a broader, larger company (Uber), or a smaller company with a narrower focus (Lyft).

Both Uber and Lyft have a well-established presence in the ride-sharing industry. Still, technology moves fast, and there's a constant threat of new entrants. Uber offers some protection if the industry goes through an upheaval through its food delivery business. Still, it faces intense competition in that area.

Lyft's singular focus on ride-hailing, while not diversified, isn't necessarily a bad thing. It means that management can devote its full focus on that business. It seems to be working, as the company has achieved profitability.

With its better valuation, narrower focus, and profitability, Lyft comes out ahead, and I'd choose its stock over Uber's shares.