8×8 Inc (NYSE:EGHT), a software company based in United States, led the NYSE gainers with a relatively large price hike in the past couple of weeks. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on 8×8’s outlook and valuation to see if the opportunity still exists. View our latest analysis for 8×8
Is 8×8 still cheap?8×8 is currently overpriced based on my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 7.71x is currently well-above the industry average of 4.07x, meaning that it is trading at a more expensive price relative to its peers. 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.
Can we expect growth from 8×8?Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With profit expected to grow by 85.25% 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? EGHT’s optimistic future growth appears to have been factored into the current share price, 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.