Investors interested in Internet - Software stocks are likely familiar with 8x8 (EGHT) and F5 Networks (FFIV). But which of these two stocks presents investors with the better value opportunity right now? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
8x8 and F5 Networks are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. 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 analyze a variety of traditional, tried-and-true metrics to help find companies 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 7.28, while FFIV has a forward P/E of 17.68. We also note that EGHT has a PEG ratio of 1.03. 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. FFIV currently has a PEG ratio of 6.08.
Another notable valuation metric for EGHT is its P/B ratio of 2.56. 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, FFIV has a P/B of 4.42.
These are just a few of the metrics contributing to EGHT's Value grade of A and FFIV's Value grade of D.
EGHT has seen stronger estimate revision activity and sports more attractive valuation metrics than FFIV, so it seems like value investors will conclude that EGHT is the superior option right now.
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8x8 Inc (EGHT): Free Stock Analysis Report F5, Inc. (FFIV): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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