Ericsson (ERIC) and The Competition Critical Review

Ericsson (NASDAQ:ERIC) is one of 110 publicly-traded companies in the “Communications Equipment” industry, but how does it compare to its competitors? We will compare Ericsson to related companies based on the strength of its analyst recommendations, valuation, risk, dividends, institutional ownership, profitability and earnings.

Insider and Institutional Ownership

8.0% of Ericsson shares are owned by institutional investors. Comparatively, 44.4% of shares of all “Communications Equipment” companies are owned by institutional investors. 18.4% of shares of all “Communications Equipment” companies are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Ericsson and its competitors, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ericsson	4	5	1	0	1.70
Ericsson Competitors	1077	4036	7105	383	2.54

Ericsson currently has a consensus price target of $9.60, indicating a potential downside of 10.07%. As a group, “Communications Equipment” companies have a potential upside of 38.92%. Given Ericsson’s competitors stronger consensus rating and higher probable upside, analysts clearly believe Ericsson has less favorable growth aspects than its competitors.

Profitability

This table compares Ericsson and its competitors’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ericsson	8.31%	20.89%	7.73%
Ericsson Competitors	5.57%	-5.33%	3.13%

Risk & Volatility

Ericsson has a beta of 0.97, meaning that its stock price is 3% less volatile than the S&P 500. Comparatively, Ericsson’s competitors have a beta of 1.17, meaning that their average stock price is 17% more volatile than the S&P 500.

Dividends

Ericsson pays an annual dividend of $0.20 per share and has a dividend yield of 1.9%. Ericsson pays out 32.8% of its earnings in the form of a dividend. As a group, “Communications Equipment” companies pay a dividend yield of 1.4% and pay out 41.0% of their earnings in the form of a dividend. Ericsson is clearly a better dividend stock than its competitors, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares Ericsson and its competitors revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Net Income	Price/Earnings Ratio
Ericsson	$24.19 billion	$2.91 billion	17.50
Ericsson Competitors	$2.74 billion	$292.54 million	4.61

Ericsson has higher revenue and earnings than its competitors. Ericsson is trading at a higher price-to-earnings ratio than its competitors, indicating that it is currently more expensive than other companies in its industry.

Summary

Ericsson beats its competitors on 8 of the 15 factors compared.

Ericsson Company Profile

Ericsson is a Swedish telecommunications technology company founded in 1876 by Lars Magnus Ericsson. Headquartered in Stockholm, it develops and supplies equipment, software and services for communications networks. The company’s offerings include mobile network infrastructure, including 5G radio and core network technologies, as well as cloud software and services for communications service providers. Ericsson also provides enterprise wireless solutions and communications platforms. Ericsson serves customers in markets around the world, including telecom operators, businesses and other organizations.