Head-To-Head Comparison: Finisar Corporation (FNSR) versus Ericsson (ERIC)

Finisar Corporation (NASDAQ: FNSR) and Ericsson (NASDAQ:ERIC) are both computer and technology companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, risk, institutional ownership, dividends, earnings, analyst recommendations and profitability.

Insider & Institutional Ownership

86.3% of Finisar Corporation shares are held by institutional investors. Comparatively, 8.0% of Ericsson shares are held by institutional investors. 1.0% of Finisar Corporation shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Profitability

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

Net Margins Return on Equity Return on Assets
Finisar Corporation 16.92% 13.11% 8.25%
Ericsson -6.40% -3.16% -1.48%

Dividends

Ericsson pays an annual dividend of $0.07 per share and has a dividend yield of 1.2%. Finisar Corporation does not pay a dividend. Ericsson pays out -15.2% of its earnings in the form of a dividend.

Analyst Recommendations

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

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Finisar Corporation 0 1 10 3 3.14
Ericsson 1 8 5 0 2.29

Finisar Corporation presently has a consensus price target of $32.79, suggesting a potential upside of 49.17%. Ericsson has a consensus price target of $5.18, suggesting a potential downside of 13.46%. Given Finisar Corporation’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Finisar Corporation is more favorable than Ericsson.

Volatility & Risk

Finisar Corporation has a beta of 1.31, indicating that its share price is 31% more volatile than the S&P 500. Comparatively, Ericsson has a beta of 1.07, indicating that its share price is 7% more volatile than the S&P 500.

Earnings and Valuation

This table compares Finisar Corporation and Ericsson’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Finisar Corporation $1.45 billion 1.73 $274.41 million $2.13 10.32
Ericsson N/A N/A N/A ($0.46) -13.00

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

Summary

Finisar Corporation beats Ericsson on 12 of the 14 factors compared between the two stocks.

About Finisar Corporation

Finisar Corporation (Finisar) is a provider of optical subsystems and components that are used in data communication and telecommunication applications. The Company’s optical subsystems consist of transmitters, receivers, transceivers, transponders and active optical cables, which provide the fundamental optical-electrical or optoelectronic interface for interconnecting the electronic equipment used in these networks, including the switches, routers, and servers used in wireline networks. These products rely on the use of semiconductor lasers and photodetectors in conjunction with integrated circuits and optoelectronic packaging to provide a means for transmitting and receiving digital signals over fiber optic cable at speeds ranging from less than one gigabit per second (Gbps), to more than 100 Gbps, over distances of less than 10 meters to more than 2,000 kilometers, using a range of network protocols and physical configurations.

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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