Are Investors Undervaluing Ericsson (ERIC) Right Now?
The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One company to watch right now is Ericsson (ERIC). ERIC is currently sporting a Zacks Rank #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 14.34, which compares to its industry's average of 32.31. ERIC's Forward P/E has been as high as 18.61 and as low as 12.48, with a median of 15.38, all within the past year.
We should also highlight that ERIC has a P/B ratio of 3.05. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 6.40. 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. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. ERIC has a P/S ratio of 1.35. This compares to its industry's average P/S of 2.1.
Finally, we should also recognize that ERIC has a P/CF ratio of 22.19. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 58.79. ERIC's P/CF has been as high as 30.43 and as low as -47.05, with a median of 22.19, all within the past year.
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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