DCF Studio

    ERIC-B.ST · STO · Technology

    Telefonaktiebolaget LM Ericsson (publ)

    Also onConsensus Drift

    Implied value per share

    SEK 60.46

    Market price

    SEK 99.98

    Implied upside

    -39.5%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    NoteRisk-free rate is an assumption: USD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    SEK 60.46-39.5%
    Exit multiple
    SEK 60.80-39.2%
    Market price
    SEK 99.98

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (SEK). Outflows negative.

    0bn9bn18bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todaySEK
    LineFY26FY27FY28FY29FY30CAGR
    RevenueSEK 226.1bnSEK 216.0bnSEK 206.3bnSEK 197.1bnSEK 188.2bn-4.5%
    EBITSEK 16.8bnSEK 16.1bnSEK 15.3bnSEK 14.7bnSEK 14.0bn-4.5%
    NOPATSEK 12.6bnSEK 12.1bnSEK 11.5bnSEK 11.0bnSEK 10.5bn-4.5%
    Add depreciation & amortisationSEK 8.9bnSEK 8.5bnSEK 8.1bnSEK 7.8bnSEK 7.4bn-4.5%
    Less capital expenditureSEK -4.2bnSEK -4.0bnSEK -3.8bnSEK -3.7bnSEK -3.5bn-4.5%
    Less increase in working capitalSEK 357.7mSEK 341.7mSEK 326.4mSEK 311.8mSEK 297.8m+4.5%
    Free cashflow to firmSEK 17.7bnSEK 16.9bnSEK 16.1bnSEK 15.4bnSEK 14.7bn-4.5%
    Discount factor0.96160.88930.82240.76050.7033-
    Present valueSEK 17.0bnSEK 15.0bnSEK 13.3bnSEK 11.7bnSEK 10.4bn-11.7%
    Present Value Of The ForecastSEK 67.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.20%USD assumption - no free live source available for this market (assumption)
    Equity risk premium6.50%Market assumption
    Beta0.670Reported 0.507, pulled toward 1.0 (Blume)
    Cost of equity8.55%Risk-free + beta x equity risk premium
    Cost of debt6.34%Interest expense / average total debt
    Market capitalisationSEK 326.3bn89.0% of capital
    Total debtSEK 40.3bn11.0% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC8.14%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareSEK 60.46

    64% of EV

    Forecast FCFF, final year
    SEK 14.7bn
    Capex at depreciation, working capital in reinvestment
    SEK 12.7bn
    Less reinvestment at g/ROIC (27.6% of NOPAT)
    SEK -3.5bn
    Capitalised
    SEK 9.2bn
    ROIC (reported)
    9.1%
    Terminal value, undiscounted
    SEK 166.9bn
    Terminal value, discounted
    SEK 117.4bn
    Enterprise value
    SEK 184.8bn
    Less net debt
    SEK -17.2bn
    Equity value
    SEK 202.1bn

    Exit at 7.9x EBITDA

    Value per shareSEK 60.80

    64% of EV

    Terminal value, undiscounted
    SEK 168.5bn
    Terminal value, discounted
    SEK 118.5bn
    Enterprise value
    SEK 186.0bn
    Less net debt
    SEK -17.2bn
    Equity value
    SEK 203.2bn

    Spread between methods: 1%.

    Sensitivity

    Value per share (SEK) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.14%79.2081.9685.4389.9696.14
    7.14%67.5568.8070.2972.1074.36
    8.14%59.3759.8860.4661.1261.89
    9.14%53.3453.4853.6253.7653.90
    10.14%49.1149.2349.3549.4749.60

    Outlined: this model. Green text: above today's price of 99.98. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-4.5%8.7%+13.2pp
    EBIT margin7.4%14.2%+6.8pp
    Discount rate8.1%5.5%-2.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.