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

Investors with an interest in Internet - Software stocks have likely encountered both 8x8 (EGHT) and Adyen N.V. Unsponsored ADR (ADYEY). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

8x8 has a Zacks Rank of #2 (Buy), while Adyen N.V. Unsponsored ADR has a Zacks Rank of #3 (Hold) right now. This means that EGHT's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

EGHT currently has a forward P/E ratio of 6.03, while ADYEY has a forward P/E of 39.33. We also note that EGHT has a PEG ratio of 0.85. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ADYEY currently has a PEG ratio of 2.13.

Another notable valuation metric for EGHT is its P/B ratio of 1.98. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ADYEY has a P/B of 9.11.

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

EGHT has seen stronger estimate revision activity and sports more attractive valuation metrics than ADYEY, so it seems like value investors will conclude that EGHT is the superior option right now.

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

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