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Telefonaktiebolaget LM Ericsson (publ)

ERIC-A.ST

Communication Equipment · Technology

Price

kr 116.60

+2.60 (+2.28%)

Market Cap

kr 388.63B

Exchange

Stockholm Stock Exchange

Winston Score

Winston is curious

A decent business — some strong pillars, some weaker.

Winston Score between 40 and 70. The stock passes some quality checks but not all.

Ericsson is a Swedish company that builds the equipment and software that powers mobile networks around the world. Its main products include radio antennas, base stations, and network management software sold to telecom operators like AT&T, Verizon, and Vodafone. It is one of only three major global suppliers of 5G network infrastructure, alongside Nokia and Huawei.

Ericsson earns most of its revenue by selling hardware and software to telecom carriers, and it also collects patent licensing fees from smartphone makers who use its wireless technology. The company operates globally, with strong presence in North America, Europe, and parts of Asia, and generates roughly $25 billion in annual revenue. Its deep patent portfolio and long-term carrier relationships create switching costs, but the business is heavily tied to telecom operators' capital spending cycles, meaning revenue can fall sharply when carriers pause network investment after major 5G buildout phases.

Winston Score History

Score breakdown

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Quality

Gross Margin

48.1%

Healthy — 48.1% gross margin

Operating Margin

10.7%

Modest — 10.7% operating margin

ROCE

3.9%

Weak — 3.9% return on capital

ROIC between 0% and 5%. They earn a few cents back per dollar invested in the business.

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Growth

Sales YoY

-7.4%

Shrinking sales (-7.4% YoY)

EPS YoY

+1442.9%

Earnings growing fast (1442.9% YoY)

Earnings growing 25%+ a year. The compounder zone.

EPS Consistency

6/8 quarters

Earnings grew in most of the last 8 quarters

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Cash Flow

Cash Conversion

142%

Turns 142% of profit into real cash

FCF Margin

14.4%

Converts sales into free cash efficiently (14.4%)

FCF margin between 10% and 20%. Every $100 in sales becomes $10 to $20 in real cash.

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Stability

Debt / Equity

0.32

Conservative — low debt load (0.32)

Interest Cover

11.26x

Comfortably covers interest (11.3x)

Interest coverage above 8. Profits cover interest many times over.

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Valuation

P/E Ratio

12.6x

Attractive valuation — P/E 12.6

P/E in the normal range. Price is roughly $15 for every $1 of yearly profit.

P/E vs Forward

-4.7

SLOWING

Earnings expected to fall — forward P/E higher than today

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Dividends

Dividend Yield

2.41%

Moderate income — 2.41% yield

Standard yield zone for stable dividend payers. A meaningful piece of total return.

Dividend Growth

+8.3%

Dividend growing modestly (8.3% YoY)

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