Is 8×8’s (NYSE:EGHT) 102% Share Price Increase Well Justified?

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. For example, the 8×8, Inc. (NYSE:EGHT) share price has soared 102% in the last half decade. Most would be very happy with that. In the last week the share price is up 1.8%.

See our latest analysis for 8×8

Because 8×8 made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

For the last half decade, 8×8 can boast revenue growth at a rate of 18% per year. Even measured against other revenue-focussed companies, that’s a good result. So it’s not entirely surprising that the share price reflected this performance by increasing at a rate of 15% per year, in that time. So it seems likely that buyers have paid attention to the strong revenue growth. 8×8 seems like a high growth stock – so growth investors might want to add it to their watchlist.

The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
NYSE:EGHT Earnings and Revenue Growth August 17th 2020

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling 8×8 stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

While the broader market gained around 21% in the last year, 8×8 shareholders lost 35%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 15% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that 8×8 is showing 4 warning signs in our investment analysis , you should know about…

8×8 is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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