The shares of Ericsson (NASDAQ:ERIC) and Vonage Holdings Corp. (NYSE:VG) were among the active stocks of the last trading sessions. Ericsson (NASDAQ:ERIC) soared to 0.45% closing at the price of $8.9 whereas the shares of Vonage Holdings Corp. (NYSE:VG) declined -12.52% with the decrease of -1.65 points closing at the price of $11.53. Ericsson has currently increase 13.67% in its stock over the period of 6-months while its rival Vonage Holdings Corp. subtracted -1.37% in the previous 6-months.
Now we have to analyze the facts that if the stocks were worthy off investors’ money? The facts to analyze here are risks, profitability, returns and price trends.
Returns and Profitability
Profitability and returns are the main reason of investment, the investors are looking for profits that they get and return they should expect over the period of time.
The first and foremost return that is considered while making an investment is the ROI or Return on Investment. The ROI is the ratio between the profit against the cost of investment. Currently the ROI of Ericsson (NASDAQ:ERIC) is -23.6% while the ROI of Vonage Holdings Corp. (NYSE:VG) is 7.2%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, ERIC’s EBITDA Margin is 40.26 whereas VG’s is 21.93.
Both the profitability ratios suggest a mixed sentiment for Ericsson (NASDAQ:ERIC) and Vonage Holdings Corp. (NYSE:VG).
EPS & Surprise Factor
Ericsson (NASDAQ:ERIC) reported $0.12/share EPS for the previous quarter where analysts were predicting an EPS to be $0.04/share Thus beating the analyst Estimates with a Surprise Factor of 200 Percent. While, Vonage Holdings Corp. (NYSE:VG) reported EPS of $0.09/share in the last quarter. The analysts projected EPS of $0.08/share depicting a Surprise of 12.5 Percent.
Taking a look at Earnings per Share, Ericsson tends to be beating the analyst estimates more than Vonage Holdings Corp.. so ERIC is more profitable than VG.
Technical Analysis of Ericsson & Vonage Holdings Corp.
Moving average convergence divergence (MACD) shows that Ericsson (NASDAQ:ERIC) is on a PRICE RELATIVITY trend While Vonage Holdings Corp. (NYSE:VG) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Ericsson was in BEARISH territory and Vonage Holdings Corp. was in BEARISH territory.
ERIC’s current statistics gauge that the stock candle is BEARISH with MEDIUM volatility. While VG’s candle is BEARISH with HIGH.
EPS Growth Rate: ERIC’s 0% versus VG’s 10%
Another shareholder value can be analyzed through the EPS growth rate; the next 5 years EPS growth rate is predicted by the analysts after the analyzing the previous trends. The next 5 year EPS growth rate of Ericsson (NASDAQ:ERIC) is predicted at 0% while Vonage Holdings Corp. (NYSE:VG) stands at 10%. These numbers suggest that VG is more suitable investment in terms of EPS growth rate.
Financial Risk and Liquidity Concerns
The current ratio and the debt ratio are the two ratios that show the investor how quickly the company is able to payout its debt and how quickly it can cover its obligations. The current ratio of ERIC stands at 1.5 while VG is at 0.7 whereas the debt ratio of the prior is 0.35 while the debt ratio of the later is 0.38.
The values of the both ratios suggest that one is more liquid and other investment is more risk free.
While making an investment, another main factor to consider before investing is the analyst recommendation on the scale of 1 to 5 where 1 is strong buy, 2 is buy, 3 is hold, 4 is Sell and 5 is strong sell. Analyst recommend 2.6 for ERIC and 1.6 for VG which means ERIC has Hold rating whereas VG has Buy rating.
Another recommendation of analyst that is to be considered worthy is the price target. The mare price or price trend does not suggest the suitability of a stock. The price target set by analyst is also to be considered while investing as it suggests to what extent the stock will rise or fall in the near future. The price target set for ERIC is $9.54 which is 6.71% of its current price while VG has price target of 17.5 which is 34.11% of its current price.
Valuation is the process of determining the company’s worth for an investor, the valuation ratios give an insight to that worthiness.
ERIC currently has price to earning P/E ratio of 0 whereas VG has 43.51 while the forward P/E ratio for the prior stands at 19.65 and for the later it depicts the value of 36.84.
The price to Book P/B for ERIC is 2.79, Price to Sale is at 1.29 and for VG these ratios stand at 5.29 and 3.09.