Investors interested in Internet - Software stocks are likely familiar with 8x8 (EGHT) and Zoom Communications (ZM). 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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, both 8x8 and Zoom Communications are sporting a Zacks Rank of #2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
EGHT currently has a forward P/E ratio of 6.00, while ZM has a forward P/E of 14.01. We also note that EGHT has a PEG ratio of 0.85. 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. ZM currently has a PEG ratio of 6.97.
Another notable valuation metric for EGHT is its P/B ratio of 1.97. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ZM has a P/B of 2.76.
These are just a few of the metrics contributing to EGHT's Value grade of A and ZM's Value grade of C.
Both EGHT and ZM are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that EGHT is the superior value option right now.
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8x8 Inc (EGHT): Free Stock Analysis Report Zoom Communications, Inc. (ZM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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