Telefonaktiebolaget LM Ericsson (publ) (ERIC) DCF Valuation & Fundamental Primer
Telefonaktiebolaget LM Ericsson (publ) (ERIC) currently trades at — with an enterprise value of $721.79B. Our proprietary institutional model rates Telefonaktiebolaget LM Ericsson (publ) at 70/100 (Grade: B+ · Quality Software Operator).
Institutional fundamental teardown of Telefonaktiebolaget LM Ericsson (publ) (ERIC) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Telefonaktiebolaget LM Ericsson (publ) (ERIC) 3-Scenario DCF Valuation Range
Stress-test ERIC's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.
Split between 5-Year Explicit Cash Flows and Discounted Terminal Value
2D Institutional Valuation Sensitivity Heatmap
Implied share price & upside/downside spread across 25 valuation states (Current Price: —).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $239.45 N/M | $253.93 N/M | $270.82 N/M | $290.78 N/M | $314.73 N/M |
| 9.3% | $215.75 N/M | $227.15 N/M | $240.25 N/M | $255.44 N/M | $273.27 N/M |
| 10.0% | $196.24 N/M | $205.41 N/M | $215.80 N/M | $227.68 N/M | $241.38 N/M |
| 10.8% | $179.90 N/M | $187.40 N/M | $195.81 N/M | $205.30 N/M | $216.10 N/M |
| 11.5% | $166.03 N/M | $172.25 N/M | $179.15 N/M | $186.87 N/M | $195.56 N/M |
Institutional Software Quality Scorecard (70/100 · Grade B+)
Solid software model with clear operating leverage, partially offset by standard SBC or moderate burn.
Elite deferred revenue float; FCF exceeds operating income by >20%
Minimal dilution friction; management compensation aligned with shareholders
Sub-par gross margins; higher cost of delivery or hardware/services mix
Moderate leverage or cash burn; monitor liquidity runway
Core Investment Strengths & Moats
- High-grade cash conversion: FCF is 491% of EBIT driven by upfront annual collections
- Low dilution friction: SBC is only 0.0% of revenue
Key Operational & Dilution Risks
- Lower software gross margins (44.9%), indicating higher hosting or service delivery drag
Telefonaktiebolaget LM Ericsson (publ) (ERIC) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $259.37B | $259.37B | $274.41B | $290.32B | $307.16B | $324.98B | $343.83B |
| Gross Profit | $116.57B | $116.58B | $123.35B | $130.50B | $138.07B | $146.08B | $154.55B |
| Operating Income (EBIT) | $9.36B | $9.36B | $9.91B | $10.48B | $11.09B | $11.73B | $12.41B |
| Stock-Based Compensation (SBC) | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| Unlevered Free Cash Flow (FCF) | $45.96B | $45.96B | $48.63B | $51.45B | $54.43B | $57.59B | $60.93B |
| SBC-Adjusted True Cash Flow | $45.96B | $45.96B | $48.63B | $51.45B | $54.43B | $57.59B | $60.93B |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -30.2 + 0.82 × (Rule of 40) · R² = 79%Stocks below the gold regression line trade at a discount relative to their Rule of 40 compounding efficiency.
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| Telefonaktiebolaget LM Ericsson (publ) | ERIC | — | $259.37B | 45.0% | 17.7% | 23.5% | — | — |
| ServiceNow | NOW | $152.61B | $10.98B | 79.2% | 31.1% | 54.2% | 15.9% | 13.9× |
| Workday, Inc. | WDAY | $50.35B | $8.00B | 75.0% | 27.4% | 43.9% | 19.0% | 6.4× |
| Salesforce | CRM | $217.10B | $37.90B | 77.2% | 32.8% | 42.8% | 8.4% | 5.8× |
| Datadog | DDOG | $46.05B | $2.68B | 80.8% | 31.1% | 57.7% | 21.3% | 17.4× |
| Snowflake Inc. | SNOW | $71.79B | $3.63B | 66.5% | 25.2% | 57.7% | 40.8% | 20.0× |
| Hubspot | HUBS | $19.89B | $2.63B | 85.0% | 21.3% | 52.7% | 19.2% | 7.7× |
| Peer Cohort Median Benchmark (N=6) | 78.2% | 29.2% | 53.5% | 19.1% | 10.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 0.3× | $84.99B | $83.33B | $25.00 | 0.0% |
| -20% Multiple Compression | 0.3× | $67.99B | $66.34B | $19.90 | -20.0% |
| -35% Multiple Compression | 0.2× | $55.24B | $53.59B | $16.08 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $1,296.83B | $1,295.17B | $388.56 | +1425.9% |
Frequently Asked Questions: Telefonaktiebolaget LM Ericsson (publ) (ERIC) Valuation
What is Telefonaktiebolaget LM Ericsson (publ) (ERIC)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, Telefonaktiebolaget LM Ericsson (publ) (ERIC) has a Base Case implied value of N/A per share (with a Bear Case of N/A and a Bull Case of N/A), compared to its current price of market price. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Telefonaktiebolaget LM Ericsson (publ) (ERIC)'s Rule of 40 score and Free Cash Flow margin?
Telefonaktiebolaget LM Ericsson (publ) achieves a Rule of 40 score of 23.5%, combining a 5.8% revenue growth run-rate with a 17.7% TTM free cash flow margin on $259.37B in trailing twelve-month revenue. In the Software & Cloud Services peer cohort, the median Rule of 40 benchmark is 53.5%.
What revenue growth rate is priced into ERIC stock according to Reverse-DCF analysis?
At market price per share (Enterprise Value of N/A), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 5.8%, compared to Telefonaktiebolaget LM Ericsson (publ)'s historical CAGR of 5.8%. Overall market expectations are rated as "Fairly Priced to Fundamentals".
How does Telefonaktiebolaget LM Ericsson (publ) compare to Software & Cloud Services software peers?
Telefonaktiebolaget LM Ericsson (publ) (ERIC) earns an institutional Software Quality Score of 70/100 (Grade B+ — Quality Software Operator). Across its Software & Cloud Services peer group (NOW, WDAY, CRM, DDOG, SNOW), the cohort trades at a median EV/TTM Revenue multiple of 10.8× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact Telefonaktiebolaget LM Ericsson (publ) (ERIC)'s valuation?
Telefonaktiebolaget LM Ericsson (publ) recorded $0 in TTM stock-based compensation (15.0% of revenue). When treating SBC as a cash-equivalent compensation expense, Telefonaktiebolaget LM Ericsson (publ)'s SBC-adjusted free cash flow yield is evaluated directly in our 3-statement model, scoring 25/25 on our Shareholder Dilution Friction pillar.