8×8 Inc (NYSE:EGHT), a software company based in United States, saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $22.55 and falling to the lows of $18.05. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether 8×8’s current trading price of $19.35 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at 8×8’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for 8×8
What is 8×8 worth?8×8 is currently overpriced based on my relative valuation model. In this instance, I’ve used price-to-book ratio (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that 8×8’s ratio of 8.21x is above its peer average of 3.81x, which suggests the stock is overvalued compared to the Software industry. Furthermore, 8×8’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will 8×8 generate?Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 57.39% over the next couple of years, the future seems bright for 8×8. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in EGHT’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe EGHT should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on EGHT for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for EGHT, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on 8×8. You can find everything you need to know about 8×8 in the latest infographic research report. If you are no longer interested in 8×8, you can use our free platform to see my list of over 50 other stocks with a high growth potential.