Analyzing AudioCodes (AUDC) & Ericsson (ERIC)

AudioCodes (NASDAQ: AUDC) and Ericsson (NASDAQ:ERIC) are both communications & networking – nec companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, risk, analyst recommendations, earnings, valuation, dividends and institutional ownership.

Dividends

Ericsson pays an annual dividend of $0.07 per share and has a dividend yield of 1.2%. AudioCodes does not pay a dividend. Ericsson pays out -11.5% of its earnings in the form of a dividend.

Profitability

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

Net Margins Return on Equity Return on Assets
AudioCodes 11.84% 8.33% 4.75%
Ericsson -8.60% -5.67% -2.57%

Earnings & Valuation

This table compares AudioCodes and Ericsson’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
AudioCodes $145.57 million 1.49 $16.23 million $0.54 12.65
Ericsson $26.02 billion 0.77 $200.60 million ($0.61) -9.85

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

Volatility and Risk

AudioCodes has a beta of 0.25, suggesting that its stock price is 75% less volatile than the S&P 500. Comparatively, Ericsson has a beta of 1.09, suggesting that its stock price is 9% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and target prices for AudioCodes and Ericsson, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AudioCodes 0 1 2 0 2.67
Ericsson 2 7 4 0 2.15

AudioCodes currently has a consensus target price of $7.75, suggesting a potential upside of 13.47%. Ericsson has a consensus target price of $5.34, suggesting a potential downside of 11.15%. Given AudioCodes’ stronger consensus rating and higher possible upside, equities analysts plainly believe AudioCodes is more favorable than Ericsson.

Insider and Institutional Ownership

21.9% of AudioCodes shares are held by institutional investors. Comparatively, 7.9% of Ericsson shares are held by institutional investors. 48.8% of AudioCodes shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Summary

AudioCodes beats Ericsson on 9 of the 15 factors compared between the two stocks.

About AudioCodes

AudioCodes Ltd. designs, develops and sells Voice over-Internet Protocol (VoIP) and converged VoIP, and data networking solutions, products and applications that facilitate Unified Communications (UC) and Contact Center (CC) services. The Company categorizes its products and services into two main business lines: network and technology. Network products consist of customer premises equipment (CPE), gateways for the enterprise and service provider (or carrier) markets and of carrier-grade-oriented low- and mid-density media gateways for service providers and Enterprise Session Border Controls (ESBCs). Complementing its media gateways and session border gateways as network products are its multi-service business routers (MSBR), Internet Protocol (IP) phones, media servers, mobile VoIP solutions and value added application products. Technology products consist of its chips and boards business products. Its products are deployed in enterprise, service provider cloud networks.

About 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.

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