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Shares of 8x8, Inc. (NASDAQ:EGHT) are up more than 50% within the past three months, and since August of 2010 shares are up more than 210%. I've owned it at various times in the past year and I still check EGHT share prices every day on the hour. And yet, I've hesitantly stayed on the sidelines during the most recent run up.

First some basics. 8x8, Inc. offers integrated voice, video and mobile communication solutions for small and medium-sized businesses. In 2002 8x8 entered the VoIP market catering to small and medium-sized business with their cloud based operating system. The company has a market capitalization of $278 million; the 52 week high is $4.61, and the 52 week low is $1.25.

Recent Events

8x8 has had a lot of positive information coming out of the news recently. The company joined the Russell 3000 index on June 28th and the company should gain exposure from institutional investors who use the index as a benchmark for investing.

The company has also remained active in acquiring smaller businesses to broaden their portfolio. In May of 2010, 8x8 purchased Central Host, Inc. and they also just recently purchased Zerigo. Zerigo provided virtual servers and monitoring tools for cloud based operating tools. The Zerigo acquisition looks to be a great investment as 8x8 will now have greatly enhanced cloud hosting services.

It is probably no surprise that there is speculation that the company remains an attractive takeover target. On June 7th, shares jumped nearly 20% minutes before the market closed on rumors that Apple (NASDAQ:AAPL) would partake in a partnership or takeover of the company. The rumors were false, but the price run up has still not faded.

What seemed to quietly slip through the news was that 8x8 surpassed 25,000 business customers. The company also continues to grow internally and through acquisition. CEO Bryan Martin recently was interviewed on Bloomberg and stated the company is "profitable and growing aggressively."

Valuation

Even after the recent run up in share price, 8x8 still looks like an interesting play. We can take a look at some of the highlights of their Q4 earnings report below:

  • Revenue from business customers was up 24% yoy.
  • The company added 3,009 new business customers in Q4.
  • Operating cash flow grew 3.4x yoy.
  • Total revenue for fiscal 2011 was $70.2 million, up 10.2% from fiscal 2010.
  • Net income in fiscal 2011 was $6.5 million, 67% higher than in fiscal 2010.
The last earnings report looked solid on all fronts. Shares of 8x8 sport a P/E of 46, a fairly high ratio, but considering future growth prospects, the company still looks attractive. The company grew revenue 10.2% in fiscal year 2011 and it is expected to grow at 8.5% in fiscal year 2012.
8x8 is also no slouch when looking at their earnings growth. EPS in fiscal year 2011 was $.10 up, from $.06 in fiscal 2010. Analysts estimate the company will grow earnings in fiscal 2012 to $.16 per share, an expected growth of 60%. For fiscal year 2013, analysts expect EPS to be $.22.

What may be the most attractive part of the balance sheet is that the company has no long term debt on the books and $18.4 million in cash and investments, $9 million of which is FCF. 8x8 has a PEG ratio of .8 which would indicate it is not highly overvalued.

Conclusion

8x8 looks to have a lot of potential to keep growing. They have experienced robust growth that does not appear to be tapering off in the near future. The company has remained profitable in 13 of the last 14 quarters and are expected to continue to grow EPS at an almost frantic pace.
I still cannot buy shares of EGHT at these prices though. I may lose sleep at night since I am not riding the momentum of a stock I have kept a close eye on for the past two years, but I have never been one to ride the wave at the highest peak.
To conclude, I believe 8x8 remains a great company to keep an eye on and do some research on, but I am comfortable enough waiting for a much needed pullback before I enter back into the frenzy.
Source: 8x8 Looks Like a Winner but I'm Waiting for a Pullback