ERIC Investment Analysis Report & Stock Research, LM Ericsson Telephone Co- Shs -B- American Deposit Receipt Repr 1 Shs B

LM Ericsson Telephone Co- Shs -B- American Deposit Receipt Repr 1 Shs B (ERIC)

ERIC Stock Report

2-Year Price History

View Larger ERIC Chart
NASDAQ:ERIC
$10.65
(4/1 4:00PM)
+2.0%
Open$10.67 Mkt Cap$34.2 Billion
High$10.69 52Wk High$11.33
Low$10.21 52Wk Low$8.10
Volume3.7 Million Avg Vol 10D8.5 Million

Ockham's Rating/Recommendation Summary

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ERIC Revenue

As a value investing shop, we are interested in seeing how ERIC's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 2.60x and the low end of the range at 1.28x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for ERIC of 3.41x is significantly above its historical average. This places ERIC at the upper end of its historical range relative to sales per share and makes it difficult to suggest an attractive price outlook. At current sales per share levels, we would need to see a decline in the Price to Sales ratio of 75% merely to return ERIC to its historical average.

ERIC Cash Earnings

Looking at ERIC specifically in their Cash Earnings capabilities, Ockham views ERIC as significantly above its historical average multiple of Cash Earnings. Looking at the last 7 years we can get a good understanding of what investors have grown to expect from ERIC. For example, ERIC's Cash Earnings ratio per share has fluctuated between 14.71 and 27.12 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where ERIC is with respect to prior business periods.

So what does this tell us about ERIC in particular? Basically, we would value the current level of Cash Earnings per share (which is at 31.78) as significantly overvalued. Just by looking at the last closing price of ERIC, which was $10.17, we can see that compared to the historical high Price to Cash Earnings levels we calculated, the market has already rewarded ERIC with a higher stock price. So basically, we don't view this level of Cash Earnings or stock price as compatible with a long term value at this point. Just remember, that does not mean that ERIC may not have other merits with which to find a good investment opportunity, it just means that we would prefer to see either an increase in Cash Earnings or a decrease in stock price before we would become bullish on this metric.

ERIC Dividends

A positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. However, we believe dividends provide a useful measure of a company's inherent expectations.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from ERIC against the historic high and low levels over an available data range. Because ERIC has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In ERIC’s case, the estimated annual dividend is $0.23 producing a current dividend yield of 2.26%. The highest dividend yield from ERIC in recent history was 3.48% while the lowest dividend yield was 0.00%. It's hard not to notice that ERIC pays a current dividend yield that is 29.89% above the historical median. This peaks our interest since our analysis looks favorably upon dividend yields that are greater than the historical median.

Peer Comparison

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LM Ericsson Telephone Co- Shs -B- American Deposit Receipt Repr 1 Shs B Industry Grouping

(3/31/2010)
Company Ticker Market Cap (Ml) Latest
Price
Price/Cash Earnings Price/Sales 5-Yr. Rev.
Growth Rate
5-Yr.
Avg. ROE.
Current 10-Yr. Range* Current 10-Yr. Range*
Peer Company Averages (not including ERIC) 8.34 3.40 » 51.81 2.51 0.76 » 8.61 27.13% 17.85%
*10 year range does not include current year values
Research In Motion Limited RIMM $41.1 Billion $73.97 14.80 8.43 » 87.26 2.91 1.49 » 17.92 79.45% 24.08%
China Telecom Corp. Limited CHA $39.6 Billion $48.99 4.90 1.82 » 9.27 1.28 0.77 » 3.27 13.86% 11.52%
LM Ericsson Telephone Co- Shs -B- American Deposit Receipt Repr 1 Shs B ERIC $34.2 Billion $10.44 31.78 7.62 » 34.13 3.41 0.32 » 5.65 10.05% 18.86%
Corning, Inc. GLW $31.3 Billion $20.21 10.99 1.91 » 55.95 5.72 0.42 » 10.60 6.96% 22.12%
The DIRECTV Group, Inc. DTV $30.9 Billion $33.81 8.69 3.08 » 91.74 1.45 0.58 » 4.87 13.68% 22.88%
China United Network Communications Ltd. CHU $26.5 Billion $11.15 2.31 1.78 » 14.80 1.17 0.56 » 6.38 21.71% 8.64%

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Key Fundamentals

ERIC - LM Ericsson Telephone Co- Shs -B- American Deposit Receipt Repr 1 Shs B Fundamentals
Price (4/1 4:00PM) $10.65
Volume (4/1 4:00PM) 3.7 Million
Last Close Price $10.44
10 Day Average Volume 8.5 Million
13 Week Price Range $9.40 - $11.33
52 Week Price Range $8.10 - $11.33
LTM Revenue $9.7 Billion
 
Shares Outstanding (12/2009) 3.3 Billion
Market Capitalization $34.2 Billion
Shares Held By Institutions 218.6 Million
Institutional Holders 247
% Shares Held By Institutions 7.30%
Earnings Per Share (EPS) $0.00
P/E Ratio n/a
Book Value Per Share $6.05
 
Gross Margin 34.90%
Annual Dividend 0.23
Dividend Yield 2.20%
Beta 1.01
Fiscal Year Ends December

About LM Ericsson Telephone Co- Shs -B- American Deposit Receipt Repr 1 Shs B

LM Ericsson Telephone Co- Shs -B- American Deposit Receipt Repr 1 Shs B is considered to operate in the Technology sector. They specifically operate in the Communication Equipment business segment contained within the Telecommunications industry.

The company is a provider of communications equipment and related professional services and multimedia solutions to operators of mobile and fixed networks worldwide.