Telefonaktiebolaget LM Ericsson (NASDAQ: ERIC) and Sierra Wireless (NASDAQ:SWIR) are both technology companies, but which is the superior investment? We will contrast the two businesses based on the strength of their profitability, risk, institutional ownership, valuation, dividends, earnings and analyst recommendations.

Profitability

This table compares Telefonaktiebolaget LM Ericsson and Sierra Wireless’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Telefonaktiebolaget LM Ericsson -17.57% -11.30% -4.81%
Sierra Wireless 0.60% 5.10% 3.34%

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Telefonaktiebolaget LM Ericsson and Sierra Wireless, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Telefonaktiebolaget LM Ericsson 3 6 3 0 2.00
Sierra Wireless 0 9 3 0 2.25

Telefonaktiebolaget LM Ericsson presently has a consensus price target of $5.49, indicating a potential downside of 16.18%. Sierra Wireless has a consensus price target of $24.73, indicating a potential upside of 52.17%. Given Sierra Wireless’ stronger consensus rating and higher probable upside, analysts plainly believe Sierra Wireless is more favorable than Telefonaktiebolaget LM Ericsson.

Valuation & Earnings

This table compares Telefonaktiebolaget LM Ericsson and Sierra Wireless’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Telefonaktiebolaget LM Ericsson $23.60 billion 0.93 -$4.13 billion ($1.33) -4.92
Sierra Wireless $692.08 million 0.84 $4.14 million $0.13 125.00

Sierra Wireless has lower revenue, but higher earnings than Telefonaktiebolaget LM Ericsson. Telefonaktiebolaget LM Ericsson is trading at a lower price-to-earnings ratio than Sierra Wireless, indicating that it is currently the more affordable of the two stocks.

Dividends

Telefonaktiebolaget LM Ericsson pays an annual dividend of $0.07 per share and has a dividend yield of 1.1%. Sierra Wireless does not pay a dividend. Telefonaktiebolaget LM Ericsson pays out -5.3% of its earnings in the form of a dividend.

Volatility & Risk

Telefonaktiebolaget LM Ericsson has a beta of 0.92, meaning that its stock price is 8% less volatile than the S&P 500. Comparatively, Sierra Wireless has a beta of 2.71, meaning that its stock price is 171% more volatile than the S&P 500.

Insider & Institutional Ownership

8.0% of Telefonaktiebolaget LM Ericsson shares are held by institutional investors. Comparatively, 21.8% of Sierra Wireless shares are held by institutional investors. 2.0% of Sierra Wireless shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

Sierra Wireless beats Telefonaktiebolaget LM Ericsson on 11 of the 15 factors compared between the two stocks.

About Telefonaktiebolaget LM Ericsson

Telefonaktiebolaget LM Ericsson (Ericsson) provides infrastructure, services and software to the telecommunication industry and other sectors. The Company’s segments include Networks, IT & Cloud and Media. The Networks segment consists of two business units: Network Products and Network Services. The overall focus is on evolving and managing access networks, including the development of hardware and software for radio access and transport networks. The IT & Cloud business includes two business units: IT & Cloud Products and IT & Cloud Services. The focus in IT & Cloud is to help telecom operators and selected enterprises through the digital transformations ahead. It develops and delivers software-based solutions for television and media and combines a product portfolio that spans the television value chain, with systems integration and managed services. The portfolio includes compression, content publishing through set-top box or pure over-the-top, content delivery and analytics.

About Sierra Wireless

Sierra Wireless, Inc. is engaged in building the Internet of Things (IoT) with wireless solutions for organizations. The Company’s OEM Solution segment offers cellular embedded wireless modules for IoT connectivity, including an embedded application framework to support customer applications. The Company’s Enterprise Solution segment offers intelligent routers and gateways, including management tools and applications that enable cellular connectivity. The Company’s Cloud and Connectivity Services segment offers a cloud based platform for deploying and managing IoT applications, Smart SIM supported by mobile core networks, and managed wireless broadband services to enable customer IoT deployments. The Company offers a portfolio of second generation, third generation, and fourth generation cellular embedded wireless modules and gateways, integrated with its secure cloud and connectivity services. The Company offers its products to original equipment manufacturers (OEMs) and enterprises.

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