Is Ericsson Fairly Priced After 18% Surge and New 5G Partnerships in 2025?

• Curious if Telefonaktiebolaget LM Ericsson is fairly priced, potentially undervalued, or trading above its true worth? Let’s explore what the numbers and the story behind them suggest for today’s investors.
• Ericsson’s stock has seen notable swings lately. It jumped 18.3% over the past month, although it dipped by 1.3% in just the last week.
• Recent headlines have swirled around Ericsson’s expanded 5G partnerships and industry collaborations, which have attracted investor attention and sparked fresh discussion about the firm’s long-term prospects. These moves offer important context for recent price action and may reveal what is driving both optimism and caution in the market right now.
• On our 6-point valuation checklist, Ericsson scores 5 out of 6. This signals the market may be offering interesting value opportunities. Stay with us as we break down the approaches behind this score and introduce an even more insightful way to interpret what “value” really means for Ericsson, coming up later in the article.

Find out why Telefonaktiebolaget LM Ericsson's 9.6% return over the last year is lagging behind its peers.

Approach 1: Telefonaktiebolaget LM Ericsson Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model projects Ericsson’s future cash flows and discounts them back to today’s value to estimate the stock’s intrinsic worth. This approach is widely used to gauge whether a stock is trading above or below what its future earnings potential truly suggests.

For Ericsson, analysts begin with the company’s latest twelve-month Free Cash Flow, which stands at SEK 29.7 billion. Future cash flow projections anticipate a gradual decrease, with expected Free Cash Flow in 2029 estimated at SEK 24.6 billion. While analysts provide estimates spanning the next five years, projections beyond that are extrapolated to offer a complete view of potential long-term performance.

Based on these calculations, the DCF model estimates Ericsson’s fair value at SEK 139.09 per share. Compared to the current market price, this valuation implies the stock is trading at a 32.5% discount, suggesting it may be significantly undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Telefonaktiebolaget LM Ericsson is undervalued by 32.5%. Track this in your watchlist or portfolio, or discover 836 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Telefonaktiebolaget LM Ericsson.

Approach 2: Telefonaktiebolaget LM Ericsson Price vs Earnings

The Price-to-Earnings (PE) ratio is a popular metric for valuing profitable companies like Ericsson because it reflects how much investors are willing to pay for each unit of current earnings. For established businesses with steady profits, this approach offers a clear snapshot of whether the stock is attractively priced relative to its profitability.

What is considered a “normal” or “fair” PE ratio depends on several factors, including growth expectations and risk. Companies expected to deliver faster earnings growth or with a lower risk profile typically command higher PE ratios, while slower growth or greater uncertainty can drive the ratio down.

Ericsson currently trades on a 12.7x PE ratio, which is significantly below both its peer group average of 44.2x and the communications industry average of 33.7x. At first glance, this might make Ericsson appear especially cheap compared to competitors and the broader sector.

However, Simply Wall St’s proprietary “Fair Ratio” estimates what multiple is justified for Ericsson, considering its unique mix of growth potential, risks, margin profile, industry, and market cap. For Ericsson, the Fair Ratio stands at 24.4x. This approach is considered more reliable than simple peer comparisons because it tailors the valuation to the company’s specific fundamentals.

Since Ericsson’s actual PE ratio is well below its Fair Ratio, the shares appear undervalued using this framework.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1402 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Telefonaktiebolaget LM Ericsson Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your story behind the numbers, a unique perspective that connects your expectations for Ericsson’s business (such as future revenue, earnings, and margins) with a financial forecast and a fair value estimate for the shares.

Instead of relying solely on static valuation metrics, Narratives let you express your personal outlook for the company, blending what you believe about its industry opportunities, competitive strengths, and risks with quantitative assumptions to produce an evidence-based fair value. Narratives are simple, interactive tools available on Simply Wall St’s Community page, used by millions of investors who want to understand not just what the numbers say, but why they matter.

By comparing your Fair Value with the current Share Price, you can quickly see if you think Ericsson is undervalued or overvalued. This equips you to decide whether to buy, sell, or hold. Because Narratives update dynamically as new information (like news, earnings, or forecasts) emerges, your view on Ericsson always stays relevant and informed.

For example, the most optimistic recent Narrative values Ericsson at SEK 99.0 per share based on strong future margin improvements, while the most cautious projects SEK 56.0, reflecting concerns over margin pressure and sector risks. This shows how different investors’ stories shape their Fair Value estimates for the same company.

Do you think there's more to the story for Telefonaktiebolaget LM Ericsson? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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