DB:ERCG

Stock Analysis Report

Telefonaktiebolaget LM Ericsson

Executive Summary

Telefonaktiebolaget LM Ericsson (publ) provides information and communications technology solutions for service providers.


Snowflake Analysis

Adequate balance sheet with moderate growth potential.


Similar Companies

Share Price & News

How has Telefonaktiebolaget LM Ericsson's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: ERCG has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

-3.6%

ERCG

-9.4%

DE Communications

-0.9%

DE Market


1 Year Return

8.1%

ERCG

-3.6%

DE Communications

12.8%

DE Market

Return vs Industry: ERCG exceeded the German Communications industry which returned -3.6% over the past year.

Return vs Market: ERCG underperformed the German Market which returned 12.8% over the past year.


Shareholder returns

ERCGIndustryMarket
7 Day-3.6%-9.4%-0.9%
30 Day8.1%-8.3%-0.4%
90 Day6.6%-11.3%2.3%
1 Year9.3%8.1%-3.1%-3.6%16.3%12.8%
3 Year51.7%44.6%-7.8%-8.1%15.8%5.7%
5 Year-9.6%-20.4%83.0%82.6%19.7%3.3%

Price Volatility Vs. Market

How volatile is Telefonaktiebolaget LM Ericsson's share price compared to the market and industry in the last 5 years?


Simply Wall St News

No news available

Valuation

Is Telefonaktiebolaget LM Ericsson undervalued compared to its fair value and its price relative to the market?

32.1%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: ERCG (€8.68) is trading below our estimate of fair value (€12.78)

Significantly Below Fair Value: ERCG is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: ERCG is poor value based on its PE Ratio (129x) compared to the Communications industry average (19.3x).

PE vs Market: ERCG is poor value based on its PE Ratio (129x) compared to the German market (21x).


Price to Earnings Growth Ratio

PEG Ratio: ERCG is poor value based on its PEG Ratio (4.3x)


Price to Book Ratio

PB vs Industry: ERCG is overvalued based on its PB Ratio (3.5x) compared to the DE Communications industry average (3.1x).


Next Steps

Future Growth

How is Telefonaktiebolaget LM Ericsson forecast to perform in the next 1 to 3 years based on estimates from 24 analysts?

29.7%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: ERCG's forecast earnings growth (29.7% per year) is above the savings rate (-0.4%).

Earnings vs Market: ERCG's earnings (29.7% per year) are forecast to grow faster than the German market (13% per year).

High Growth Earnings: earnings are expected to grow significantly over the next 3 years.

Revenue vs Market: ERCG's revenue (3.1% per year) is forecast to grow slower than the German market (5.2% per year).

High Growth Revenue: ERCG's revenue (3.1% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: ERCG's Return on Equity is forecast to be low in 3 years time (18.1%).


Next Steps

Past Performance

How has Telefonaktiebolaget LM Ericsson performed over the past 5 years?

-45.4%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: ERCG has a large one-off loss of SEK10.8B impacting its December 31 2019 financial results.

Growing Profit Margin: ERCG became profitable in the past.


Past Earnings Growth Analysis

Earnings Trend: ERCG has become profitable over the past 5 years, growing earnings by -45.4% per year.

Accelerating Growth: ERCG has become profitable in the last year, making the earnings growth rate difficult to compare to its 5-year average.

Earnings vs Industry: ERCG has become profitable in the last year, making it difficult to compare its past year earnings growth to the Communications industry (31.6%).


Return on Equity

High ROE: ERCG's Return on Equity (2.2%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Telefonaktiebolaget LM Ericsson's financial position?


Financial Position Analysis

Short Term Liabilities: ERCG's short term assets (SEK153.9B) exceed its short term liabilities (SEK116.8B).

Long Term Liabilities: ERCG's short term assets (SEK153.9B) exceed its long term liabilities (SEK77.7B).


Debt to Equity History and Analysis

Debt Level: ERCG's debt to equity ratio (46%) is considered high.

Reducing Debt: ERCG's debt to equity ratio has increased from 18% to 46% over the past 5 years.


Balance Sheet

Inventory Level: ERCG has a low level of unsold assets or inventory.

Debt Coverage by Assets: ERCG's debt is covered by short term assets (assets are 4.1x debt).


Cash Runway Analysis

For companies that have on average been loss making in the past we assess whether they have at least 1 year of cash runway.

Stable Cash Runway: ERCG is profitable, therefore cash runway is not a concern.

Forecast Cash Runway: ERCG is profitable, therefore cash runway is not a concern.


Next Steps

Dividend

What is Telefonaktiebolaget LM Ericsson's current dividend yield, its reliability and sustainability?

1.73%

Current Dividend Yield


Upcoming Dividend Payment

Purchase Telefonaktiebolaget LM Ericsson before the 'Buy Limit' to receive their next dividend payment.


Dividend Yield vs Market

company1.7%marketbottom25%1.3%markettop25%3.6%industryaverage1.9%forecastin3Years2.5%

Current dividend yield vs market & industry

Notable Dividend: ERCG's dividend (1.73%) is higher than the bottom 25% of dividend payers in the German market (1.31%).

High Dividend: ERCG's dividend (1.73%) is low compared to the top 25% of dividend payers in the German market (3.63%).


Stability and Growth of Payments

Stable Dividend: ERCG's dividend payments have been volatile in the past 10 years.

Growing Dividend: ERCG's dividend payments have fallen over the past 10 years.


Current Payout to Shareholders

Dividend Coverage: With its high payout ratio (223.1%), ERCG's dividend payments are not well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: ERCG's dividends in 3 years are forecast to be well covered by earnings (40.1% payout ratio).


Next Steps

Management

How experienced are the management team and are they aligned to shareholders interests?

2.8yrs

Average management tenure


CEO

E. Ekholm (56yo)

3.1yrs

Tenure

kr737,547

Compensation

Mr. E. Börje Ekholm, MSc, MBA serves as Independent Director of Trimble Inc. since January 04, 2020. He has been the Chief Executive Officer and President of Telefonaktiebolaget LM Ericsson (publ) since Ja ...


CEO Compensation Analysis

Compensation vs Market: E.'s total compensation ($USD75.85K) is below average for companies of similar size in the German market ($USD4.38M).

Compensation vs Earnings: E.'s compensation has been consistent with company performance over the past year.


Leadership Team

NamePositionTenureCompensationOwnership
E. Ekholm
President3.1yrskr737.55k0.031% SEK8.5m
Carl Mellander
Senior VP2.8yrsno data0.00094% SEK256.8k
Eva-Britt Allenius
Chief Accounting Officer0yrsno datano data
Erik Ekudden
Group CTO2.6yrsno datano data
Peter Nyquist
VP & Head of Investor Relations6.4yrsno datano data
Xavier Dedullen
Senior VP1.8yrsno datano data
Stella Medlicott
SVP, Chief Marketing & Communications Officer and Head of Group Marketing & Corporate Relations0.7yrsno datano data
MajBritt Arfert
Senior VP3.3yrsno data0.00063% SEK172.1k
Björn Boström
Senior Vice President of Supply & Information Technology0yrsno datano data
Ola Rembe
VP & Head of External Communications0yrsno datano data

2.8yrs

Average Tenure

55yo

Average Age

Experienced Management: ERCG's management team is considered experienced (2.8 years average tenure).


Board Members

NamePositionTenureCompensationOwnership
E. Ekholm
President3.1yrskr737.55k0.031% SEK8.5m
Nora Denzel
Independent Director6.8yrskr1.69m0.00012% SEK32.8k
Kurt Jofs
Independent Director1.9yrskr1.48m0.0015% SEK412.5k
Helena Stjernholm
Deputy Chairman3.8yrskr1.66m0.00061% SEK166.7k
Jacob Wallenberg
Deputy Chairman0yrskr1.91m0.013% SEK3.5m
Jon Baksaas
Independent Director2.9yrskr1.50mno data
Torbjorn Nyman
Employee Representative Director1.9yrskr31.50k0.00094% SEK256.8k
Ronnie Leten
Chairman of the Board1.9yrskr4.83m0.0030% SEK825.1k
Roger Svensson
Employee Representative Director2.9yrskr48.00k0.00060% SEK163.9k
Eric Elzvik
Independent Director2.9yrskr1.44m0.00030% SEK82.0k

2.9yrs

Average Tenure

58.5yo

Average Age

Experienced Board: ERCG's board of directors are not considered experienced ( 2.9 years average tenure), which suggests a new board.


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Top Shareholders

Company Information

Telefonaktiebolaget LM Ericsson (publ)'s company bio, employee growth, exchange listings and data sources


Key Information

  • Name: Telefonaktiebolaget LM Ericsson (publ)
  • Ticker: ERCG
  • Exchange: DB
  • Founded: 1876
  • Industry: Communications Equipment
  • Sector: Tech
  • Market Cap: kr288.552b
  • Listing Market Cap: kr27.320b
  • Shares outstanding: 3.31b
  • Website: https://www.ericsson.com

Number of Employees


Location

  • Telefonaktiebolaget LM Ericsson (publ)
  • Torshamnsgatan 21
  • Kista
  • Stockholm
  • Stockholm County
  • 164 83
  • Sweden

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
ERICNasdaqGS (Nasdaq Global Select)ADR EACH REP 1 ORD'B'SEK1USUSDDec 1972
ERIC NBMV (Bolsa Mexicana de Valores)ADR EACH REP 1 ORD'B'SEK1MXMXNDec 1972
ERCADB (Deutsche Boerse AG)ADR EACH REP 1 ORD'B'SEK1DEEURDec 1972
ERCAXTRA (XETRA Trading Platform)ADR EACH REP 1 ORD'B'SEK1DEEURDec 1972
ERIX.FOTCPK (Pink Sheets LLC)YesClass B SharesUSUSDSep 1990
ERIC BOM (OMX Nordic Exchange Stockholm)YesClass B SharesSESEKSep 1990
ERCBDB (Deutsche Boerse AG)YesClass B SharesDEEURSep 1990
0O87LSE (London Stock Exchange)YesClass B SharesGBSEKSep 1990
ERIBRHLSE (OMX Nordic Exchange Helsinki)YesClass B SharesFIEURSep 1990
ERICBSWX (SIX Swiss Exchange)YesClass B SharesCHCHFSep 1990
ERCBXTRA (XETRA Trading Platform)YesClass B SharesDEEURSep 1990
ERICBSBATS-CHIXE (BATS 'Chi-X Europe')YesClass B SharesGBSEKSep 1990
ERIBRHBATS-CHIXE (BATS 'Chi-X Europe')YesClass B SharesGBEURSep 1990
ERCBETLX (Eurotlx)YesClass B SharesITEURSep 1990
ERIC AOM (OMX Nordic Exchange Stockholm)Class A SharesSESEKJan 1992
ERCGXTRA (XETRA Trading Platform)Class A SharesDEEURJan 1992
0O86LSE (London Stock Exchange)Class A SharesGBSEKJan 1992
ERCGDB (Deutsche Boerse AG)Class A SharesDEEURJan 1992
ERICASBATS-CHIXE (BATS 'Chi-X Europe')Class A SharesGBSEKJan 1992

Biography

Telefonaktiebolaget LM Ericsson (publ) provides information and communications technology solutions for service providers. It operates through four segments: Networks, Digital Services, Managed Services, and Emerging Business and Other. The Networks segment provides mobile radio access networks, transport solutions, and site solutions, as well as related services, such as network rollout, network tuning, and customer support. The Digital Services segment offers products and services for service providers in the areas of business support systems, operations support systems, cloud core, cloud communication, network functions virtualization, and cloud infrastructure, as well as consulting, learning, and testing services. The Managed Services segment provides vendor agnostic services, including networks and IT managed, application development and modernization, and network design and optimization services to manage service providers networks. The Emerging Business and Other segment consists of emerging businesses; iconectiv that offers software-based interconnection solutions; media solutions; and Red Bee Media, which consists of technology enabled services to manage the play-out platform for broadcasters and content owners. It operates in Europe and Latin America, the Middle East and Africa, North America, North East Asia, South East Asia, Oceania, and India. The company was founded in 1876 and is headquartered in Stockholm, Sweden. 


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2020/02/23 21:39
End of Day Share Price2020/02/21 00:00
Earnings2019/12/31
Annual Earnings2019/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.