Ericsson (NASDAQ: ERIC) and Lumentum Holdings (NASDAQ:LITEV) are both computer and technology companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, valuation, institutional ownership, earnings, dividends, analyst recommendations and profitabiliy.

Dividends

Ericsson pays an annual dividend of $0.07 per share and has a dividend yield of 1.0%. Lumentum Holdings does not pay a dividend. Ericsson pays out -18.9% of its earnings in the form of a dividend.

Analyst Ratings

This is a summary of recent recommendations for Ericsson and Lumentum Holdings, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ericsson 0 12 5 0 2.29
Lumentum Holdings 2 0 2 1 2.40

Ericsson currently has a consensus price target of $6.20, indicating a potential downside of 12.92%. Lumentum Holdings has a consensus price target of $34.67, indicating a potential upside of 47.83%. Given Lumentum Holdings’ stronger consensus rating and higher probable upside, analysts clearly believe Lumentum Holdings is more favorable than Ericsson.

Insider & Institutional Ownership

8.1% of Ericsson shares are owned by institutional investors. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Profitability

This table compares Ericsson and Lumentum Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ericsson -4.93% -1.32% -0.63%
Lumentum Holdings -21.89% -45.77% -22.01%

Earnings and Valuation

This table compares Ericsson and Lumentum Holdings’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Ericsson N/A N/A N/A ($0.37) -19.24
Lumentum Holdings N/A N/A N/A N/A N/A

Summary

Ericsson beats Lumentum Holdings on 7 of the 10 factors compared between the two stocks.

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.

About Lumentum Holdings

Lumentum Holdings Inc. is a provider of optical and photonic products for a range of end market applications, including data communications (Datacom) and telecommunications (Telecom) networking and commercial lasers (commercial lasers) for manufacturing, inspection and life-science applications. The Company operates in two segments: Optical Communications (OpComms) and Commercial Lasers (Lasers). The Company’s OpComms products include a range of components, modules and subsystems to support and maintain customers in its two primary markets: Telecom and Datacom. The Company’s Lasers products serve customers in markets and applications, such as manufacturing, biotechnology, graphics and imaging, remote sensing, and precision machining, such as drilling in printed circuit boards, wafer singulation and solar cell scribing. The Company’s customers include original equipment manufacturers (OEMs).

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