Brocade Communications Systems (NASDAQ: BRCD) and Telefonaktiebolaget LM Ericsson (NASDAQ:ERIC) are both mid-cap technology companies, but which is the better business? We will contrast the two businesses based on the strength of their analyst recommendations, profitability, valuation, institutional ownership, dividends, risk and earnings.
Volatility and Risk
Brocade Communications Systems has a beta of 0.54, suggesting that its stock price is 46% less volatile than the S&P 500. Comparatively, Telefonaktiebolaget LM Ericsson has a beta of 1.09, suggesting that its stock price is 9% more volatile than the S&P 500.
This table compares Brocade Communications Systems and Telefonaktiebolaget LM Ericsson’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Brocade Communications Systems||-3.56%||-3.07%||-1.62%|
|Telefonaktiebolaget LM Ericsson||-8.60%||-5.67%||-2.57%|
Institutional and Insider Ownership
83.7% of Brocade Communications Systems shares are held by institutional investors. Comparatively, 8.1% of Telefonaktiebolaget LM Ericsson shares are held by institutional investors. 1.8% of Brocade Communications Systems shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.
This is a breakdown of current recommendations for Brocade Communications Systems and Telefonaktiebolaget LM Ericsson, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Brocade Communications Systems||1||3||0||0||1.75|
|Telefonaktiebolaget LM Ericsson||2||7||4||0||2.15|
Brocade Communications Systems presently has a consensus price target of $12.83, suggesting a potential upside of 0.81%. Telefonaktiebolaget LM Ericsson has a consensus price target of $5.59, suggesting a potential downside of 16.32%. Given Brocade Communications Systems’ higher probable upside, research analysts plainly believe Brocade Communications Systems is more favorable than Telefonaktiebolaget LM Ericsson.
Brocade Communications Systems pays an annual dividend of $0.22 per share and has a dividend yield of 1.7%. Telefonaktiebolaget LM Ericsson pays an annual dividend of $0.07 per share and has a dividend yield of 1.0%. Brocade Communications Systems pays out 314.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Telefonaktiebolaget LM Ericsson pays out -11.5% of its earnings in the form of a dividend.
Valuation and Earnings
This table compares Brocade Communications Systems and Telefonaktiebolaget LM Ericsson’s gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Brocade Communications Systems||$2.35 billion||2.25||$213.81 million||$0.07||181.86|
|Telefonaktiebolaget LM Ericsson||$26.02 billion||0.86||$200.60 million||($0.61)||-10.95|
Brocade Communications Systems has higher earnings, but lower revenue than Telefonaktiebolaget LM Ericsson. Telefonaktiebolaget LM Ericsson is trading at a lower price-to-earnings ratio than Brocade Communications Systems, indicating that it is currently the more affordable of the two stocks.
Brocade Communications Systems beats Telefonaktiebolaget LM Ericsson on 11 of the 16 factors compared between the two stocks.
Brocade Communications Systems Company Profile
Brocade Communications Systems, Inc. (Brocade) is a supplier of networking hardware, software and services, including storage area networking (SAN) solutions and Internet protocol (IP) networking solutions for businesses and organizations of various types and sizes. The Company operates through three segments: SAN Products, IP Networking Products and Global Services. The SAN Products segment includes infrastructure products and solutions that help customers develop and deploy storage and server consolidation, disaster recovery and data security. The IP Networking Products segment includes Layer 2 and Layer 3 Ethernet switches, and routers to connect users over private and public networks. The Global Services segment includes break or fix maintenance, installation, consulting, network management and software maintenance, and post-contract customer support. Its products enable customers to deploy architectures and technologies, including virtualization and cloud computing.
Telefonaktiebolaget LM Ericsson Company Profile
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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