Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. TheStreet Ratings quantitative algorithm evaluates over 4,300 stocks on a daily basis by 32 different data factors and assigns a unique buy, sell, or hold recommendation on each stock. Click here to learn more.
"We rate ERICSSON (ERIC) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, expanding profit margins, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
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Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ERIC's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.50, which illustrates the ability to avoid short-term cash problems.
- 39.54% is the gross profit margin for ERICSSON which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, ERIC's net profit margin of 4.59% significantly trails the industry average.
- ERICSSON's earnings per share declined by 40.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ERICSSON increased its bottom line by earning $0.58 versus $0.28 in the prior year. This year, the market expects an improvement in earnings ($0.72 versus $0.58).
- ERIC, with its decline in revenue, underperformed when compared the industry average of 5.6%. Since the same quarter one year prior, revenues fell by 24.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: ERIC Ratings Report
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