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%)
Taking everything into account, ERCG scores 5 out of 10 in our fundamental rating. ERCG was compared to 31 industry peers in the Communications Equipment industry. While ERCG belongs to the best of the industry regarding profitability, 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.
- ERCG had a positive operating cash flow in the past year.
- The reported net income has been mixed in the past 5 years: ERCG reported negative net income in multiple years.
- Of the past 5 years ERCG 4 years had a positive operating cash flow.
1.2 Ratios
- ERCG has a better Return On Assets (8.72%) than 83.87% of its industry peers.
- The Return On Equity of ERCG (24.01%) is better than 90.32% of its industry peers.
- With an excellent Return On Invested Capital value of 13.55%, ERCG belongs to the best of the industry, outperforming 83.87% of the companies in the same industry.
- Measured over the past 3 years, the Average Return On Invested Capital for ERCG 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
- 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.
- Looking at the Gross Margin, with a value of 47.62%, ERCG is in the better half of the industry, outperforming 61.29% of the companies in the same industry.
- ERCG's Gross Margin has improved in the last couple of years.
| 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
- ERCG has a Return on Invested Capital (ROIC), which is just above the Cost of Capital (WACC), which means it is creating some value.
- There is no outstanding debt for ERCG. This means it has a Debt/Equity and Debt/FCF ratio of 0 and it is amongst the best of the sector and industry.
2.2 Solvency
- The Debt to FCF ratio of ERCG is 1.45, which is an excellent value as it means it would take ERCG, only 1.45 years of fcf income to pay off 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.
- ERCG has a Debt/Equity ratio of 0.35. This is a healthy value indicating a solid balance between debt and equity.
- ERCG has a Debt to Equity ratio (0.35) which is comparable to the rest of the industry.
| 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.
- The Current ratio of ERCG (1.17) is worse than 77.42% of its industry peers.
- ERCG has a Quick Ratio of 1.17. This is a bad value and indicates that ERCG is not financially healthy enough and could expect problems in meeting its short term obligations.
- ERCG's Quick ratio of 0.94 is on the low side compared to the rest of the industry. ERCG is outperformed by 70.97% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.17 | ||
| Quick Ratio | 0.94 |
3. Growth
3.1 Past
- ERCG shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 413.40%, which is quite impressive.
- 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
- ERCG is expected to show a very negative growth in Earnings Per Share. In the coming years, the EPS will decrease by -10.81% yearly.
- The Revenue is expected to decrease by -0.79% on average over the next years.
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
- When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.
4. Valuation
4.1 Price/Earnings Ratio
- Based on the Price/Earnings ratio of 10.76, the valuation of ERCG can be described as reasonable.
- ERCG's Price/Earnings ratio is rather cheap when compared to the industry. ERCG is cheaper than 93.55% of the companies in the same industry.
- Compared to an average S&P500 Price/Earnings ratio of 27.21, ERCG is valued rather cheaply.
- With a Price/Forward Earnings ratio of 14.07, ERCG is valued correctly.
- Based on the Price/Forward Earnings ratio, ERCG is valued cheaply inside the industry as 87.10% of the companies are valued more expensively.
- The average S&P500 Price/Forward Earnings ratio is at 25.98. ERCG is valued slightly cheaper when compared to this.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 10.76 | ||
| Fwd PE | 14.07 |
4.2 Price Multiples
- 90.32% of the companies in the same industry are more expensive than ERCG, based on the Enterprise Value to EBITDA ratio.
- 77.42% of the companies in the same industry are more expensive than ERCG, based on the Price/Free Cash Flow ratio.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 10.35 | ||
| EV/EBITDA | 7.33 |
4.3 Compensation for Growth
- The excellent profitability rating of ERCG may justify a higher PE ratio.
- ERCG's earnings are expected to decrease with -9.63% in the coming years. This may justify a cheaper valuation.
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.
- ERCG's Dividend Yield is rather good when compared to the industry average which is at 2.62. ERCG pays more dividend than 90.32% of the companies 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
- 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
- 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.