Umpqua Holdings Corp (UMPQ), Brooks Automation, Inc. (USA) (BRKS): 3 Undervalued Companies That Deserve Your Attention (Part 2)

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8×8, Inc. (NASDAQ:EGHT) has no debt and currently trades at just 7.37 times trailing twelve month’s earnings. The company also has a profit margin over 70% and a return-on-equity of over 80%. The best part of 8×8 is the discount you are paying for what is really a growth company. As large and small businesses alike look to cut costs, 8×8, Inc. (NASDAQ:EGHT) will be set up perfectly to capitalize. Although it has some large competitors (think Verizon, AT&T, etc.), I still believe their torrid growth will continue.

Wrap Up

The process of determining if a company is undervalued is not easy. It is important to not only emphasize traditional valuation metrics, but to include all aspects of a business’s operation. You should be looking for companies that have low debt-to-equity (two out of the three have no debt and the other has a debt/equity less than .50), low price/earnings multiples, and trade at or below book value. The cherry on top is growth. If you can identify companies that meet our value requirements that also have sustainable growth potential, you are golden.

One caveat to remember when investing in small cap value companies is that they tend to more volatile than the broader market. Remember that you should be buying these companies with a long term outlook. You also should be reevaluating all the companies in your portfolio regularly to ensure that the basis behind why you bought them in the first place still holds true.

The article 3 Undervalued Companies That Deserve Your Attention (Part 2) originally appeared on Fool.com and is written by Daniel Paterson.

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