Analyzing Ericsson (ERIC) & Its Competitors

Ericsson (NASDAQ:ERIC) is one of 110 public companies in the “Communications Equipment” industry, but how does it contrast to its competitors? We will compare Ericsson to related businesses based on the strength of its institutional ownership, earnings, dividends, risk, profitability, valuation and analyst recommendations.

Earnings & Valuation

This table compares Ericsson and its competitors gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Net Income	Price/Earnings Ratio
Ericsson	$230.78 billion	$2.91 billion	16.82
Ericsson Competitors	$5.62 billion	$292.54 million	4.11

Ericsson has higher revenue and earnings than its competitors. Ericsson is trading at a higher price-to-earnings ratio than its competitors, indicating that it is currently more expensive than other companies in its industry.

Dividends

Ericsson pays an annual dividend of $0.19 per share and has a dividend yield of 1.9%. Ericsson pays out 31.1% of its earnings in the form of a dividend. As a group, “Communications Equipment” companies pay a dividend yield of 1.5% and pay out 43.8% of their earnings in the form of a dividend. Ericsson is clearly a better dividend stock than its competitors, given its higher yield and lower payout ratio.

Profitability

This table compares Ericsson and its competitors’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ericsson	8.31%	20.89%	7.73%
Ericsson Competitors	5.56%	-5.22%	3.19%

Insider & Institutional Ownership

8.0% of Ericsson shares are held by institutional investors. Comparatively, 44.4% of shares of all “Communications Equipment” companies are held by institutional investors. 18.4% of shares of all “Communications Equipment” companies are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Risk and Volatility

Ericsson has a beta of 0.97, suggesting that its stock price is 3% less volatile than the S&P 500. Comparatively, Ericsson’s competitors have a beta of 1.17, suggesting that their average stock price is 17% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings for Ericsson and its competitors, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ericsson	4	5	1	0	1.70
Ericsson Competitors	1073	4031	7097	382	2.54

Ericsson currently has a consensus price target of $9.60, indicating a potential downside of 6.43%. As a group, “Communications Equipment” companies have a potential upside of 56.60%. Given Ericsson’s competitors stronger consensus rating and higher probable upside, analysts plainly believe Ericsson has less favorable growth aspects than its competitors.

Summary

Ericsson beats its competitors on 8 of the 15 factors compared.

About Ericsson

Telefonaktiebolaget LM Ericsson (publ), together with its subsidiaries, provides mobile connectivity solutions for telcom operators and enterprise customers in various sectors in North America, Europe, Latin America, the Middle East, Africa, North East Asia, South East Asia, Oceania, and India. It operates in four segments: Networks; Cloud Software and Services; Enterprise; and Other. The Networks segment offers radio access network (RAN) solutions for various network spectrum bands, including purpose-built and open RAN-prepared hardware and software. This segment also provides cloud RAN; transport solutions; passive and active antennas; and a range of service portfolios covering network deployment and support. The Cloud Software and Services segment offers core networks, business and operational support systems, network design and optimization, and managed network services. The Enterprise segment offers a global communications platform, including cloud-based unified communications as a service, contact center as a service, and communications platform as a service; enterprise wireless solutions comprising private wireless networks and wireless wan pre-packaged solutions; and technologies and new business solutions, such as mobile financial services, security solutions, and advertising services. The Other segment includes Redbee media that prepares and distributes live and video services for broadcasters, sports leagues, and communications service providers. It offers its services through wholesalers and distributors. The company was formerly known as Allmanna Telefon AB LM Ericsson and changed its name to Telefonaktiebolaget LM Ericsson (publ) in January 1926. Telefonaktiebolaget LM Ericsson (publ) was founded in 1876 and is headquartered in Stockholm, Sweden.