Intrinsic value of Ericsson ADR - ERIC

Previous Close

$6.00

  Intrinsic Value

$6.25

stock screener

  Rating & Target

hold

+4%

  Value-price divergence*

+795%

Previous close

$6.00

 
Intrinsic value

$6.25

 
Up/down potential

+4%

 
Rating

hold

 
Value-price divergence*

+795%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ERIC stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 20.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -9.85
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  24,599
  25,091
  25,668
  26,328
  27,068
  27,889
  28,789
  29,770
  30,831
  31,975
  33,202
  34,514
  35,915
  37,407
  38,992
  40,674
  42,456
  44,343
  46,338
  48,447
  50,673
  53,021
  55,498
  58,109
  60,860
  63,758
  66,808
  70,019
  73,398
  76,953
  80,692
Variable operating expenses, $m
 
  9,073
  9,271
  9,497
  9,751
  10,032
  10,340
  10,676
  11,039
  11,431
  11,851
  11,821
  12,301
  12,812
  13,355
  13,931
  14,542
  15,188
  15,871
  16,593
  17,356
  18,160
  19,009
  19,903
  20,845
  21,837
  22,882
  23,982
  25,139
  26,357
  27,637
Fixed operating expenses, $m
 
  15,754
  16,148
  16,552
  16,966
  17,390
  17,824
  18,270
  18,727
  19,195
  19,675
  20,167
  20,671
  21,188
  21,717
  22,260
  22,817
  23,387
  23,972
  24,571
  25,186
  25,815
  26,461
  27,122
  27,800
  28,495
  29,207
  29,938
  30,686
  31,453
  32,240
Total operating expenses, $m
  23,903
  24,827
  25,419
  26,049
  26,717
  27,422
  28,164
  28,946
  29,766
  30,626
  31,526
  31,988
  32,972
  34,000
  35,072
  36,191
  37,359
  38,575
  39,843
  41,164
  42,542
  43,975
  45,470
  47,025
  48,645
  50,332
  52,089
  53,920
  55,825
  57,810
  59,877
Operating income, $m
  696
  263
  249
  279
  352
  468
  625
  824
  1,065
  1,349
  1,675
  2,526
  2,943
  3,407
  3,919
  4,482
  5,098
  5,768
  6,495
  7,282
  8,131
  9,046
  10,029
  11,084
  12,215
  13,425
  14,718
  16,099
  17,573
  19,143
  20,815
EBITDA, $m
  1,678
  1,099
  1,093
  1,132
  1,216
  1,343
  1,513
  1,726
  1,982
  2,282
  2,626
  3,016
  3,453
  3,938
  4,473
  5,060
  5,701
  6,398
  7,153
  7,970
  8,851
  9,799
  10,817
  11,910
  13,079
  14,330
  15,667
  17,094
  18,615
  20,235
  21,960
Interest expense (income), $m
  62
  72
  82
  95
  109
  124
  142
  161
  182
  205
  229
  255
  283
  313
  345
  378
  414
  452
  492
  535
  580
  627
  677
  730
  785
  844
  906
  971
  1,039
  1,111
  1,187
Earnings before tax, $m
  445
  191
  167
  184
  243
  343
  483
  663
  883
  1,144
  1,447
  2,271
  2,660
  3,094
  3,575
  4,104
  4,684
  5,316
  6,003
  6,747
  7,552
  8,419
  9,352
  10,355
  11,430
  12,581
  13,813
  15,129
  16,534
  18,032
  19,628
Tax expense, $m
  236
  52
  45
  50
  66
  93
  130
  179
  238
  309
  391
  613
  718
  835
  965
  1,108
  1,265
  1,435
  1,621
  1,822
  2,039
  2,273
  2,525
  2,796
  3,086
  3,397
  3,729
  4,085
  4,464
  4,869
  5,300
Net income, $m
  190
  140
  122
  135
  178
  250
  352
  484
  645
  835
  1,056
  1,658
  1,942
  2,259
  2,610
  2,996
  3,419
  3,881
  4,382
  4,925
  5,513
  6,146
  6,827
  7,559
  8,344
  9,184
  10,083
  11,044
  12,069
  13,163
  14,328

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  5,557
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  31,311
  26,273
  26,878
  27,568
  28,344
  29,203
  30,146
  31,173
  32,284
  33,481
  34,766
  36,141
  37,608
  39,169
  40,829
  42,590
  44,457
  46,433
  48,522
  50,729
  53,060
  55,520
  58,114
  60,848
  63,728
  66,762
  69,956
  73,319
  76,857
  80,579
  84,494
Adjusted assets (=assets-cash), $m
  25,754
  26,273
  26,878
  27,568
  28,344
  29,203
  30,146
  31,173
  32,284
  33,481
  34,766
  36,141
  37,608
  39,169
  40,829
  42,590
  44,457
  46,433
  48,522
  50,729
  53,060
  55,520
  58,114
  60,848
  63,728
  66,762
  69,956
  73,319
  76,857
  80,579
  84,494
Revenue / Adjusted assets
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
  0.955
Average production assets, $m
  3,496
  3,563
  3,645
  3,739
  3,844
  3,960
  4,088
  4,227
  4,378
  4,540
  4,715
  4,901
  5,100
  5,312
  5,537
  5,776
  6,029
  6,297
  6,580
  6,879
  7,196
  7,529
  7,881
  8,252
  8,642
  9,054
  9,487
  9,943
  10,423
  10,927
  11,458
Working capital, $m
  8,952
  4,366
  4,466
  4,581
  4,710
  4,853
  5,009
  5,180
  5,365
  5,564
  5,777
  6,006
  6,249
  6,509
  6,785
  7,077
  7,387
  7,716
  8,063
  8,430
  8,817
  9,226
  9,657
  10,111
  10,590
  11,094
  11,625
  12,183
  12,771
  13,390
  14,040
Total debt, $m
  2,949
  2,354
  2,705
  3,106
  3,557
  4,056
  4,604
  5,200
  5,846
  6,542
  7,288
  8,087
  8,939
  9,846
  10,811
  11,834
  12,918
  14,066
  15,280
  16,563
  17,917
  19,346
  20,853
  22,441
  24,115
  25,878
  27,734
  29,687
  31,743
  33,905
  36,180
Total liabilities, $m
  15,861
  15,265
  15,616
  16,017
  16,468
  16,967
  17,515
  18,111
  18,757
  19,453
  20,199
  20,998
  21,850
  22,757
  23,722
  24,745
  25,829
  26,977
  28,191
  29,474
  30,828
  32,257
  33,764
  35,352
  37,026
  38,789
  40,645
  42,598
  44,654
  46,816
  49,091
Total equity, $m
  15,451
  11,009
  11,262
  11,551
  11,876
  12,236
  12,631
  13,061
  13,527
  14,029
  14,567
  15,143
  15,758
  16,412
  17,107
  17,845
  18,627
  19,455
  20,331
  21,256
  22,232
  23,263
  24,350
  25,495
  26,702
  27,973
  29,312
  30,720
  32,203
  33,762
  35,403
Total liabilities and equity, $m
  31,312
  26,274
  26,878
  27,568
  28,344
  29,203
  30,146
  31,172
  32,284
  33,482
  34,766
  36,141
  37,608
  39,169
  40,829
  42,590
  44,456
  46,432
  48,522
  50,730
  53,060
  55,520
  58,114
  60,847
  63,728
  66,762
  69,957
  73,318
  76,857
  80,578
  84,494
Debt-to-equity ratio
  0.191
  0.210
  0.240
  0.270
  0.300
  0.330
  0.360
  0.400
  0.430
  0.470
  0.500
  0.530
  0.570
  0.600
  0.630
  0.660
  0.690
  0.720
  0.750
  0.780
  0.810
  0.830
  0.860
  0.880
  0.900
  0.930
  0.950
  0.970
  0.990
  1.000
  1.020
Adjusted equity ratio
  0.397
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  190
  140
  122
  135
  178
  250
  352
  484
  645
  835
  1,056
  1,658
  1,942
  2,259
  2,610
  2,996
  3,419
  3,881
  4,382
  4,925
  5,513
  6,146
  6,827
  7,559
  8,344
  9,184
  10,083
  11,044
  12,069
  13,163
  14,328
Depreciation, amort., depletion, $m
  982
  836
  844
  853
  864
  876
  888
  902
  917
  934
  951
  490
  510
  531
  554
  578
  603
  630
  658
  688
  720
  753
  788
  825
  864
  905
  949
  994
  1,042
  1,093
  1,146
Funds from operations, $m
  2,211
  975
  966
  988
  1,042
  1,126
  1,241
  1,386
  1,562
  1,769
  2,007
  2,148
  2,452
  2,790
  3,163
  3,573
  4,022
  4,510
  5,040
  5,613
  6,232
  6,899
  7,615
  8,384
  9,208
  10,090
  11,032
  12,038
  13,112
  14,256
  15,474
Change in working capital, $m
  663
  86
  100
  115
  129
  143
  157
  171
  185
  199
  214
  228
  244
  260
  276
  293
  310
  328
  347
  367
  387
  409
  431
  454
  479
  504
  531
  559
  588
  619
  651
Cash from operations, $m
  1,548
  890
  865
  873
  913
  983
  1,084
  1,215
  1,377
  1,570
  1,793
  1,920
  2,208
  2,530
  2,887
  3,281
  3,712
  4,182
  4,693
  5,247
  5,845
  6,490
  7,184
  7,930
  8,729
  9,585
  10,501
  11,480
  12,524
  13,637
  14,824
Maintenance CAPEX, $m
  0
  -350
  -356
  -364
  -374
  -384
  -396
  -409
  -423
  -438
  -454
  -471
  -490
  -510
  -531
  -554
  -578
  -603
  -630
  -658
  -688
  -720
  -753
  -788
  -825
  -864
  -905
  -949
  -994
  -1,042
  -1,093
New CAPEX, $m
  -1,173
  -67
  -82
  -94
  -105
  -117
  -128
  -139
  -151
  -162
  -174
  -186
  -199
  -212
  -225
  -239
  -253
  -268
  -283
  -299
  -316
  -334
  -352
  -371
  -391
  -411
  -433
  -456
  -480
  -505
  -531
Cash from investing activities, $m
  -915
  -417
  -438
  -458
  -479
  -501
  -524
  -548
  -574
  -600
  -628
  -657
  -689
  -722
  -756
  -793
  -831
  -871
  -913
  -957
  -1,004
  -1,054
  -1,105
  -1,159
  -1,216
  -1,275
  -1,338
  -1,405
  -1,474
  -1,547
  -1,624
Free cash flow, $m
  633
  473
  427
  415
  434
  482
  560
  667
  804
  969
  1,165
  1,262
  1,519
  1,809
  2,131
  2,488
  2,881
  3,311
  3,780
  4,289
  4,841
  5,437
  6,080
  6,771
  7,513
  8,310
  9,163
  10,075
  11,050
  12,090
  13,200
Issuance/(repayment) of debt, $m
  50
  292
  351
  401
  451
  499
  548
  596
  646
  696
  747
  799
  852
  907
  964
  1,023
  1,084
  1,148
  1,214
  1,283
  1,354
  1,429
  1,507
  1,588
  1,674
  1,763
  1,856
  1,953
  2,056
  2,163
  2,275
Issuance/(repurchase) of shares, $m
  12
  88
  132
  155
  147
  110
  43
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  57
  380
  483
  556
  598
  609
  591
  596
  646
  696
  747
  799
  852
  907
  964
  1,023
  1,084
  1,148
  1,214
  1,283
  1,354
  1,429
  1,507
  1,588
  1,674
  1,763
  1,856
  1,953
  2,056
  2,163
  2,275
Total cash flow (excl. dividends), $m
  995
  852
  910
  971
  1,031
  1,091
  1,151
  1,264
  1,449
  1,665
  1,912
  2,060
  2,371
  2,716
  3,096
  3,512
  3,966
  4,459
  4,994
  5,572
  6,195
  6,866
  7,586
  8,359
  9,187
  10,072
  11,019
  12,028
  13,105
  14,253
  15,475
Retained Cash Flow (-), $m
  741
  -228
  -253
  -289
  -325
  -360
  -395
  -430
  -466
  -502
  -538
  -576
  -615
  -654
  -695
  -738
  -782
  -828
  -875
  -925
  -977
  -1,031
  -1,087
  -1,146
  -1,207
  -1,271
  -1,338
  -1,409
  -1,482
  -1,560
  -1,640
Prev. year cash balance distribution, $m
 
  4,670
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  5,295
  656
  682
  707
  731
  756
  834
  984
  1,163
  1,373
  1,484
  1,757
  2,062
  2,400
  2,774
  3,183
  3,631
  4,118
  4,647
  5,218
  5,835
  6,500
  7,214
  7,980
  8,801
  9,680
  10,620
  11,623
  12,693
  13,834
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  5,077
  601
  593
  582
  567
  548
  563
  615
  668
  720
  705
  750
  784
  806
  814
  809
  790
  758
  715
  663
  604
  539
  473
  406
  342
  282
  228
  180
  139
  104
Current shareholders' claim on cash, %
  100
  99.4
  98.5
  97.4
  96.5
  95.8
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6
  95.6

Telefonaktiebolaget LM Ericsson (publ) provides network equipment and software, and services for network and business operations worldwide. Its Networks segment delivers products and solutions for mobile access, Internet protocol (IP) and transmission networks, core networks, and cloud. This segment offers radio access solutions; IP routing and transport solutions; microwave and optical transmission solutions for mobile and fixed networks; IP multimedia subsystem solutions; a cloud platform that handles workloads for various clouds; and telecom, IT, and commercial cloud services. The company’s Global Services segment delivers managed services, including services for designing, building, operating, and managing the day-to-day operations of the customer’s network or solutions; maintenance services; network sharing solutions; shared solutions; and managed services of IT environments, as well as provides broadcast and media services. This segment also offers services to expand, upgrade, restructure, or migrate networks; network-rollout services; customer support services; and network design and optimization services. In addition, it provides consulting and systems integration services comprising technology and operational consulting, integration of multi-vendor equipment, design and integration, and transforming programs; and industry specific solutions. The company’s Support Solutions segment offers operations support systems; business support systems that provide revenue management, mediation, and customer care solutions; television (TV) and media solutions; and M-Commerce solutions for money transfer. It serves telecom operators, as well as media, public safety, utilities, and transport industries. The company has collaborations with Qualcomm Technologies, Inc. and AT&T on 5G new radio trials intended to accelerate 5G deployments. The company was founded in 1876 and is headquartered in Stockholm, Sweden.

FINANCIAL RATIOS  of  Ericsson ADR (ERIC)

Valuation Ratios
P/E Ratio 103.2
Price to Sales 0.8
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 12.7
Price to Free Cash Flow 52.3
Growth Rates
Sales Growth Rate -9.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -8.8%
Cap. Spend. - 3 Yr. Gr. Rate 14.4%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 13.3%
Total Debt to Equity 19.1%
Interest Coverage 8
Management Effectiveness
Return On Assets 0.7%
Ret/ On Assets - 3 Yr. Avg. 3.3%
Return On Total Capital 1%
Ret/ On T. Cap. - 3 Yr. Avg. 5.3%
Return On Equity 1.2%
Return On Equity - 3 Yr. Avg. 6.2%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 31.4%
Gross Margin - 3 Yr. Avg. 34.6%
EBITDA Margin 6.1%
EBITDA Margin - 3 Yr. Avg. 10.1%
Operating Margin 2.8%
Oper. Margin - 3 Yr. Avg. 6.3%
Pre-Tax Margin 1.8%
Pre-Tax Margin - 3 Yr. Avg. 5.6%
Net Profit Margin 0.8%
Net Profit Margin - 3 Yr. Avg. 3.8%
Effective Tax Rate 53%
Eff/ Tax Rate - 3 Yr. Avg. 37.9%
Payout Ratio 713.2%

ERIC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ERIC stock intrinsic value calculation we used $24599 million for the last fiscal year's total revenue generated by Ericsson ADR. The default revenue input number comes from 2016 income statement of Ericsson ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ERIC stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for ERIC is calculated based on our internal credit rating of Ericsson ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Ericsson ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ERIC stock the variable cost ratio is equal to 36.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $15370 million in the base year in the intrinsic value calculation for ERIC stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Ericsson ADR.

Corporate tax rate of 27% is the nominal tax rate for Ericsson ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ERIC stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ERIC are equal to 14.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Ericsson ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ERIC is equal to 17.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $15451 million for Ericsson ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 3351.06 million for Ericsson ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Ericsson ADR at the current share price and the inputted number of shares is $20.1 billion.

RELATED COMPANIES Price Int.Val. Rating
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NOK Nokia ADR 6.19 8.49  buy
ORAN Orange ADR 16.78 21.69  buy
AAPL Apple 157.50 139.92  hold
SKM SK Telecom ADR 25.34 15.04  sell
VOD Vodafone Group 28.55 11.95  str.sell
QCOM Qualcomm 51.92 49.78  hold

COMPANY NEWS

▶ [$$] Ericsson Sues Wiko for Patent Infringement   [Aug-17-17 02:22PM  The Wall Street Journal]
▶ The sale that changed everything for Ericsson and CTO Arun Bhikshesvaran   [Aug-16-17 12:25PM  American City Business Journals]
▶ What Just Happened to Ericssons Stock Price?   [Aug-01-17 03:10PM  Market Realist]
▶ Why Ericsson Stock Fell Last Week   [Jul-25-17 08:04AM  Market Realist]
▶ Look Past Ericsson's Rough Near Term   [Jul-24-17 07:00AM  Morningstar]
▶ Making Sense of the VerizonEricsson SD WAN Deal   [Jul-20-17 07:40AM  Market Realist]
▶ [$$] Nokia: Ericsson Results Don't Bode Well   [Jul-19-17 02:06PM  Barrons.com]
▶ [$$] Ericsson Steps Up Efficiency Plans as Sales Decline   [12:36AM  The Wall Street Journal]
▶ Ericsson CEO Ekholm: 'The Real Execution Starts Now'   [Jul-18-17 11:22PM  Barrons.com]
▶ Ericsson reports 2Q loss   [09:45PM  Associated Press]
▶ [$$] Ericsson Steps Up Efficiency Plans as Sales Decline   [02:15PM  The Wall Street Journal]
▶ A Technical Analysis of Apple   [09:05AM  Market Realist]
▶ How Is Ericsson Stock Performing in July 2017?   [Jul-10-17 10:36AM  Market Realist]
▶ Ericsson Is Struggling to Compete with Huawei   [07:37AM  Market Realist]
▶ Will Ericsson Be Able to Improve Operating Margins?   [Jul-07-17 03:36PM  Market Realist]
▶ Cevian Capital Reveals Stake in Ericsson   [02:06PM  Market Realist]
▶ Nokia Oyj (ADR) (NOK) Stock Needs a New Story   [Jul-06-17 07:03AM  InvestorPlace]
▶ How Wall Street Analysts View Ericsson in June 2017   [Jun-28-17 07:35AM  Market Realist]
▶ Why Ericsson Is Looking to Sell Its Media Business   [Jun-27-17 10:36AM  Market Realist]
▶ A Look at Ericssons Plans to Improve Its Profit Margins   [Jun-26-17 10:36AM  Market Realist]
▶ Can Ericsson Limit Losses in Its IT and Cloud Segment?   [Jun-23-17 10:38AM  Market Realist]
▶ What Impacted Ericsson Stock in 2017?   [07:37AM  Market Realist]
▶ Over one million new Mobile Internet users added per day   [Jun-13-17 03:32AM  GlobeNewswire]
▶ [$$] Cevian Takes an Active Role in Ericsson   [Jun-02-17 10:44PM  Barrons.com]
▶ Changes to Ericsson's nomination committee   [Jun-01-17 02:01AM  GlobeNewswire]
▶ [$$] Ericsson: swing time   [08:01AM  Financial Times]
▶ Erik Ekudden named Group CTO for Ericsson   [09:02AM  GlobeNewswire]
▶ It's time to prepare for 5G: Ericsson CTO   [12:45AM  CNBC Videos]
▶ Green flag waves on 5G in Indianapolis   [May-22-17 09:00AM  PR Newswire]
▶ Ericsson head of North America steps down suddenly   [May-16-17 12:45PM  American City Business Journals]
▶ Ericsson announces change in Executive Team   [May-11-17 08:32AM  GlobeNewswire]
▶ 3 Beaten-Down Stocks Ready to Bounce Back   [May-10-17 08:00AM  Motley Fool]
▶ Ericsson's nomination committee appointed   [May-09-17 02:04AM  GlobeNewswire]
Stock chart of ERIC Financial statements of ERIC
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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