ERICSSON LM-A SHS (ERCG.DE) Stock Fundamental Analysis
Europe - Frankfurt Stock Exchange - FRA:ERCG - SE0000108649 - Common Stock
8.93 EUR
+0.73 (+8.9%)
Overall ERCG gets a fundamental rating of 5 out of 10. We evaluated ERCG against 31 industry peers in the Communications Equipment industry. ERCG scores excellent on profitability, but there are concerns on its financial health. ERCG has a valuation in line with the averages, but on the other hand it scores bad on growth. Finally ERCG also has an excellent dividend rating.
1. Profitability
1.1 Basic Checks
- ERCG had positive earnings in the past year.
- In the past year ERCG had a positive cash flow from operations.
- The reported net income has been mixed in the past 5 years: ERCG reported negative net income in multiple years.
- ERCG had a positive operating cash flow in 4 of the past 5 years.
1.2 Ratios
- The Return On Assets of ERCG (8.72%) is better than 83.87% of its industry peers.
- ERCG has a better Return On Equity (24.01%) than 90.32% of its industry peers.
- The Return On Invested Capital of ERCG (13.55%) is better than 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 10.63%.
- The 3 year average ROIC (9.43%) for ERCG is below the current ROIC(13.55%), indicating increased profibility in the last year.
| 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
- ERCG has a Profit Margin of 10.26%. This is amongst the best in the industry. ERCG outperforms 83.87% of its industry peers.
- In the last couple of years the Profit Margin of ERCG has declined.
- ERCG has a Operating Margin of 12.97%. This is amongst the best in the industry. ERCG outperforms 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.
- ERCG has no outstanding debt. Therefor its Debt/Equity and Debt/FCF ratios are 0 and belong to the best of the industry.
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.
- With a decent Debt to FCF ratio value of 1.45, ERCG is doing good in the industry, outperforming 77.42% of the companies in the same industry.
- A Debt/Equity ratio of 0.35 indicates that ERCG is not too dependend on debt financing.
- ERCG has a Debt to Equity ratio (0.35) which is in line with 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
- ERCG has a Current Ratio of 1.17. This is a normal value and indicates that ERCG is financially healthy and should not expect problems in meeting its short term obligations.
- With a Current ratio value of 1.17, ERCG is not doing good in the industry: 77.42% of the companies in the same industry are doing better.
- A Quick Ratio of 0.94 indicates that ERCG may have some problems paying its short term obligations.
- ERCG has a Quick ratio of 0.94. This is in the lower half of the industry: ERCG underperforms 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 413.40% over the past year.
- ERCG shows quite a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 8.51% yearly.
EPS 1Y (TTM)413.4%
EPS 3Y11.79%
EPS 5Y8.51%
EPS Q2Q%15.04%
Revenue 1Y (TTM)N/A
Revenue growth 3YN/A
Revenue growth 5YN/A
Sales Q2Q%-8.73%
3.2 Future
- The Earnings Per Share is expected to decrease by -10.81% on average over the next years. This is quite bad
- ERCG is expected to show a decrease in Revenue. In the coming years, the Revenue will decrease by -0.79% yearly.
EPS Next Y-23.51%
EPS Next 2Y-10.55%
EPS Next 3Y-9.63%
EPS Next 5Y-10.81%
Revenue Next Year-0.39%
Revenue Next 2Y0.82%
Revenue Next 3Y0.13%
Revenue Next 5Y-0.79%
3.3 Evolution
- The EPS 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
- A Price/Earnings ratio of 10.76 indicates a reasonable valuation of ERCG.
- Based on the Price/Earnings ratio, ERCG is valued cheaply inside the industry as 93.55% of the companies are valued more expensively.
- ERCG is valuated cheaply when we compare the Price/Earnings ratio to 27.21, which is the current average of the S&P500 Index.
- ERCG is valuated correctly with a Price/Forward Earnings ratio of 14.07.
- ERCG's Price/Forward Earnings ratio is rather cheap when compared to the industry. ERCG is cheaper than 87.10% 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 25.98.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 10.76 | ||
| Fwd PE | 14.07 |
4.2 Price Multiples
- Based on the Enterprise Value to EBITDA ratio, ERCG is valued cheaper than 90.32% of the companies 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 | 10.35 | ||
| EV/EBITDA | 7.33 |
4.3 Compensation for Growth
- ERCG has an outstanding profitability rating, which may justify a higher PE ratio.
- A cheap valuation may be justified as ERCG's earnings are expected to decrease with -9.63% in the coming years.
PEG (NY)N/A
PEG (5Y)1.26
EPS Next 2Y-10.55%
EPS Next 3Y-9.63%
5. Dividend
5.1 Amount
- ERCG has a Yearly Dividend Yield of 3.32%. Purely for dividend investing, there may be better candidates out there.
- Compared to an average industry Dividend Yield of 2.62, ERCG pays a better dividend. On top of this ERCG pays more dividend than 90.32% of the companies listed in the same industry.
- Compared to an average S&P500 Dividend Yield of 1.81, ERCG pays a better dividend.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 3.32% |
5.2 History
- The dividend of ERCG is nicely growing with an annual growth rate of 22.02%!
Dividend Growth(5Y)22.02%
Div Incr Years1
Div Non Decr Years6
5.3 Sustainability
- ERCG pays out 37.84% of its income as dividend. This is a sustainable payout ratio.
DP37.84%
EPS Next 2Y-10.55%
EPS Next 3Y-9.63%
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 8 / 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 10.76 and the Price/Book (PB) ratio is 3.06.
How financially healthy is ERICSSON LM-A SHS?
The financial health rating of ERICSSON LM-A SHS (ERCG.DE) is 4 / 10.