EGHT vs. ADYEY: Which Stock Is the Better Value Option?

Investors interested in stocks from the Internet - Software sector have probably already heard of 8x8 (EGHT) and Adyen N.V. Unsponsored ADR (ADYEY). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, 8x8 has a Zacks Rank of #2 (Buy), while Adyen N.V. Unsponsored ADR has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that EGHT has an improving earnings outlook. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

EGHT currently has a forward P/E ratio of 6.63, while ADYEY has a forward P/E of 40.20. We also note that EGHT has a PEG ratio of 0.76. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ADYEY currently has a PEG ratio of 2.19.

Another notable valuation metric for EGHT is its P/B ratio of 2.2. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ADYEY has a P/B of 10.85.

These metrics, and several others, help EGHT earn a Value grade of A, while ADYEY has been given a Value grade of F.

EGHT is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that EGHT is likely the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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