Ericsson (NASDAQ:ERIC) and Silicom (NASDAQ:SILC) Critical Analysis

Ericsson (NASDAQ:ERIC) and Silicom (NASDAQ:SILC) are both technology companies, but which is the superior stock? We will contrast the two companies based on the strength of their earnings, analyst recommendations, institutional ownership, profitability, valuation, dividends and risk.

Insider and Institutional Ownership

8.0% of Ericsson shares are held by institutional investors. Comparatively, 52.8% of Silicom shares are held by institutional investors. 25.4% of Silicom shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Volatility & Risk

Ericsson has a beta of 0.97, suggesting that its share price is 3% less volatile than the S&P 500. Comparatively, Silicom has a beta of 1.69, suggesting that its share price is 69% more volatile than the S&P 500.

Profitability

This table compares Ericsson and Silicom’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ericsson	8.31%	20.89%	7.73%
Silicom	-8.47%	-6.31%	-4.65%

Valuation and Earnings

This table compares Ericsson and Silicom”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ericsson	$24.19 billion	1.55	$2.91 billion	$0.61	18.27
Silicom	$61.93 million	3.02	-$11.48 million	($1.28)	-25.42

Ericsson has higher revenue and earnings than Silicom. Silicom is trading at a lower price-to-earnings ratio than Ericsson, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Ericsson and Silicom, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ericsson	4	5	1	0	1.70
Silicom	1	0	1	0	2.00

Ericsson currently has a consensus target price of $9.60, indicating a potential downside of 13.85%. Silicom has a consensus target price of $60.00, indicating a potential upside of 84.37%. Given Silicom’s stronger consensus rating and higher probable upside, analysts plainly believe Silicom is more favorable than Ericsson.

Summary

Ericsson beats Silicom on 7 of the 13 factors compared between the two stocks.

About Ericsson

Telefonaktiebolaget LM Ericsson (publ), together with its subsidiaries, provides mobile connectivity solutions for telcom operators and enterprise customers in various sectors in North America, Europe, Latin America, the Middle East, Africa, North East Asia, South East Asia, Oceania, and India. It operates in four segments: Networks; Cloud Software and Services; Enterprise; and Other. The Networks segment offers radio access network (RAN) solutions for various network spectrum bands, including purpose-built and open RAN-prepared hardware and software. This segment also provides cloud RAN; transport solutions; passive and active antennas; and a range of service portfolios covering network deployment and support. The Cloud Software and Services segment offers core networks, business and operational support systems, network design and optimization, and managed network services. The Enterprise segment offers a global communications platform, including cloud-based unified communications as a service, contact center as a service, and communications platform as a service; enterprise wireless solutions comprising private wireless networks and wireless wan pre-packaged solutions; and technologies and new business solutions, such as mobile financial services, security solutions, and advertising services. The Other segment includes Redbee media that prepares and distributes live and video services for broadcasters, sports leagues, and communications service providers. It offers its services through wholesalers and distributors. The company was formerly known as Allmanna Telefon AB LM Ericsson and changed its name to Telefonaktiebolaget LM Ericsson (publ) in January 1926. Telefonaktiebolaget LM Ericsson (publ) was founded in 1876 and is headquartered in Stockholm, Sweden.

About Silicom

Silicom Ltd., together with its subsidiaries, designs, manufactures, markets, and supports networking and data infrastructure solutions for servers, server-based systems, and communications devices. It offers server network interface cards; and smart cards, such as smart server adapters, which include redirector and switching cards, encryption and data compression hardware acceleration cards, forward error correction acceleration and offloading cards, time synchronization cards, and field programmable gate array-based cards. The company also provides virtualized and universal customer-premises equipment; and edge devices for SD-WAN, secure access service edge, Telco dedicated routers, and NFV deployments. It serves original equipment manufacturing, cloud, telco, mobile, and related service provider markets. The company operates in the United States, North America, Israel, Europe, and the Asia Pacific. Silicom Ltd. was incorporated in 1987 and is headquartered in Kfar Saba, Israel.