Is Ericsson (ERIC) Stock Undervalued Right Now?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company to watch right now is Ericsson (ERIC). ERIC is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 14.34 right now. For comparison, its industry sports an average P/E of 29.79. Over the past year, ERIC's Forward P/E has been as high as 18.61 and as low as 12.48, with a median of 15.38.

Another valuation metric that we should highlight is ERIC's P/B ratio of 3.05. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. ERIC's current P/B looks attractive when compared to its industry's average P/B of 6.10. ERIC's P/B has been as high as 3.73 and as low as 2.72, with a median of 3.22, over the past year.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. ERIC has a P/S ratio of 1.57. This compares to its industry's average P/S of 2.08.

Finally, investors will want to recognize that ERIC has a P/CF ratio of 22.19. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 42.10. Over the past 52 weeks, ERIC's P/CF has been as high as 30.43 and as low as -47.05, with a median of 22.19.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Ericsson is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, ERIC feels like a great value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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