ERICSSON LM-A SHS (ERCG.DE) Stock Fundamental Analysis
Europe - Frankfurt Stock Exchange - FRA:ERCG - SE0000108649 - Common Stock
8.2 EUR
+0.1 (+1.23%)
ERCG gets a fundamental rating of 6 out of 10. The analysis compared the fundamentals against 31 industry peers in the Communications Equipment industry. While ERCG has a great profitability rating, there are some minor concerns on its financial health. ERCG is valued quite cheap, while showing a decent growth score. This is a good combination! ERCG also has an excellent dividend rating.
1. Profitability
1.1 Basic Checks
- In the past year ERCG was profitable.
- In the past year ERCG had a positive cash flow from operations.
- Of the past 5 years ERCG 4 years were profitable.
- In the past 5 years ERCG always reported a positive cash flow from operatings.
1.2 Ratios
- The Return On Assets of ERCG (8.72%) is better than 83.87% of its industry peers.
- The Return On Equity of ERCG (24.01%) is better than 90.32% of its industry peers.
- ERCG's Return On Invested Capital of 13.55% is amongst the best of the industry. ERCG outperforms 83.87% of its industry peers.
- ERCG had an Average Return On Invested Capital over the past 3 years of 9.43%. This is in line with the industry average of 11.39%.
- The last Return On Invested Capital (13.55%) for ERCG is above the 3 year average (9.43%), which is a sign of increasing profitability.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 8.72% | ||
| ROE | 24.01% | ||
| ROIC | 13.55% |
ROA(3y)-1.18%
ROA(5y)2.06%
ROE(3y)-4.3%
ROE(5y)5.63%
ROIC(3y)9.43%
ROIC(5y)10.87%
1.3 Margins
- With an excellent Profit Margin value of 10.26%, ERCG belongs to the best of the industry, outperforming 83.87% of the companies in the same industry.
- In the last couple of years the Profit Margin of ERCG has declined.
- ERCG has a better Operating Margin (12.97%) than 80.65% of its industry peers.
- In the last couple of years the Operating Margin of ERCG has grown nicely.
- ERCG has a Gross Margin of 47.62%. This is in the better half of the industry: ERCG outperforms 61.29% of its industry peers.
- In the last couple of years the Gross Margin of ERCG has grown nicely.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 12.97% | ||
| PM (TTM) | 10.26% | ||
| GM | 47.62% |
OM growth 3Y-12.66%
OM growth 5Y14.26%
PM growth 3Y-90.62%
PM growth 5Y-61.69%
GM growth 3Y1.11%
GM growth 5Y3.7%
2. Health
2.1 Basic Checks
- The Return on Invested Capital (ROIC) is just above the Cost of Capital (WACC), so ERCG is still creating some value.
- The number of shares outstanding for ERCG remains at a similar level compared to 1 year ago.
- Compared to 5 years ago, ERCG has more shares outstanding
- The debt/assets ratio for ERCG has been reduced compared to a year ago.
2.2 Solvency
- ERCG has a debt to FCF ratio of 1.45. This is a very positive value and a sign of high solvency as it would only need 1.45 years to pay back of all of its debts.
- ERCG has a Debt to FCF ratio of 1.45. This is in the better half of the industry: ERCG outperforms 77.42% of its industry peers.
- A Debt/Equity ratio of 0.35 indicates that ERCG is not too dependend on debt financing.
- ERCG has a Debt to Equity ratio of 0.35. This is comparable to the rest of the industry: ERCG outperforms 51.61% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.35 | ||
| Debt/FCF | 1.45 | ||
| Altman-Z | N/A |
ROIC/WACC1.77
WACC7.66%
2.3 Liquidity
- A Current Ratio of 1.17 indicates that ERCG should not have too much problems paying its short term obligations.
- ERCG's Current ratio of 1.17 is on the low side compared to the rest of the industry. ERCG is outperformed by 77.42% of its industry peers.
- A Quick Ratio of 0.94 indicates that ERCG may have some problems paying its short term obligations.
- The Quick ratio of ERCG (0.94) is worse than 70.97% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.17 | ||
| Quick Ratio | 0.94 |
3. Growth
3.1 Past
- The Earnings Per Share has grown by an impressive 541.12% over the past year.
- ERCG shows a very negative growth in Earnings Per Share. Measured over the last years, the EPS has been decreasing by -17.01% yearly.
- ERCG shows a decrease in Revenue. In the last year, the revenue decreased by -2.65%.
- ERCG shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 1.76% yearly.
EPS 1Y (TTM)541.12%
EPS 3Y-38.27%
EPS 5Y-17.01%
EPS Q2Q%113.66%
Revenue 1Y (TTM)-2.65%
Revenue growth 3Y2.19%
Revenue growth 5Y1.76%
Sales Q2Q%-8.99%
3.2 Future
- Based on estimates for the next years, ERCG will show a very strong growth in Earnings Per Share. The EPS will grow by 29.52% on average per year.
- ERCG is expected to show a decrease in Revenue. In the coming years, the Revenue will decrease by -1.48% yearly.
EPS Next Y352.29%
EPS Next 2Y97.18%
EPS Next 3Y58.79%
EPS Next 5Y29.52%
Revenue Next Year-5.09%
Revenue Next 2Y-2.77%
Revenue Next 3Y-1.19%
Revenue Next 5Y-1.47%
3.3 Evolution
- When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.
- The Revenue growth rate is decreasing: in the next years the growth will be less than in the last years.
4. Valuation
4.1 Price/Earnings Ratio
- Based on the Price/Earnings ratio of 10.25, the valuation of ERCG can be described as reasonable.
- Based on the Price/Earnings ratio, ERCG is valued cheaply inside the industry as 93.55% of the companies are valued more expensively.
- When comparing the Price/Earnings ratio of ERCG to the average of the S&P500 Index (27.30), we can say ERCG is valued rather cheaply.
- ERCG is valuated correctly with a Price/Forward Earnings ratio of 13.08.
- ERCG's Price/Forward Earnings ratio is rather cheap when compared to the industry. ERCG is cheaper than 83.87% of the companies in the same industry.
- ERCG's Price/Forward Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 24.32.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 10.25 | ||
| Fwd PE | 13.08 |
4.2 Price Multiples
- Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of ERCG indicates a rather cheap valuation: ERCG is cheaper than 90.32% of the companies listed in the same industry.
- ERCG's Price/Free Cash Flow ratio is a bit cheaper when compared to the industry. ERCG is cheaper than 77.42% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 9.52 | ||
| EV/EBITDA | 6.71 |
4.3 Compensation for Growth
- The low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
- ERCG has an outstanding profitability rating, which may justify a higher PE ratio.
- A more expensive valuation may be justified as ERCG's earnings are expected to grow with 58.79% in the coming years.
PEG (NY)0.03
PEG (5Y)N/A
EPS Next 2Y97.18%
EPS Next 3Y58.79%
5. Dividend
5.1 Amount
- With a Yearly Dividend Yield of 3.23%, ERCG has a reasonable but not impressive dividend return.
- ERCG's Dividend Yield is rather good when compared to the industry average which is at 2.52. ERCG pays more dividend than 90.32% of the companies in the same industry.
- Compared to an average S&P500 Dividend Yield of 1.82, ERCG pays a better dividend.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 3.23% |
5.2 History
- On average, the dividend of ERCG grows each year by 22.02%, which is quite nice.
Dividend Growth(5Y)22.02%
Div Incr Years1
Div Non Decr Years6
5.3 Sustainability
- 37.84% of the earnings are spent on dividend by ERCG. This is a low number and sustainable payout ratio.
- ERCG's earnings are growing more than its dividend. This makes the dividend growth sustainable.
DP37.84%
EPS Next 2Y97.18%
EPS Next 3Y58.79%
ERICSSON LM-A SHS / ERCG.DE FAQ
Can you provide the ChartMill fundamental rating for ERICSSON LM-A SHS?
ChartMill assigns a fundamental rating of 6 / 10 to ERCG.DE.
What is the valuation status of ERICSSON LM-A SHS (ERCG.DE) stock?
ChartMill assigns a valuation rating of 9 / 10 to ERICSSON LM-A SHS (ERCG.DE). This can be considered as Undervalued.
What is the profitability of ERCG stock?
ERICSSON LM-A SHS (ERCG.DE) has a profitability rating of 8 / 10.
What are the PE and PB ratios of ERICSSON LM-A SHS (ERCG.DE) stock?
The Price/Earnings (PE) ratio for ERICSSON LM-A SHS (ERCG.DE) is 10.25 and the Price/Book (PB) ratio is 2.82.
How financially healthy is ERICSSON LM-A SHS?
The financial health rating of ERICSSON LM-A SHS (ERCG.DE) is 4 / 10.