Are Investors Undervaluing Ericsson (ERIC) Right Now?

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

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 has a Forward P/E ratio of 14.34. This compares to its industry's average Forward P/E of 29.76. 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 notable valuation metric for ERIC is its 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. Over the past 12 months, ERIC's P/B has been as high as 3.73 and as low as 2.72, with a median of 3.22.

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 1.51. This compares to its industry's average P/S of 2.01.

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 49.46. 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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