Investors interested in stocks from the Internet - Software sector have probably already heard of 8x8 (EGHT) and F5 Networks (FFIV). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, 8x8 is sporting a Zacks Rank of #2 (Buy), while F5 Networks has a Zacks Rank of #3 (Hold). 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 only part of the picture for value investors.
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 5.92, while FFIV has a forward P/E of 17.25. We also note that EGHT has a PEG ratio of 0.83. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. FFIV currently has a PEG ratio of 5.93.
Another notable valuation metric for EGHT is its P/B ratio of 2.08. 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, FFIV has a P/B of 4.35.
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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