Valuation of Ericsson
Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
During the last turbulent year on the financial markets, a lot of brokerage firms miss-predicted different stocks’ target prices. The purpose with this analytical survey was to explain why there is a deviation between the intrinsic value of Ericsson’s one-year historical stock price development, April 2000 to April 2001, and the financial analysts’ forecasted target prices. In order to comprehend why there is a divergence it was essential to analyse which are the important indicators/factors in each identified valuation problem area, and to which extent the financial analysts have considered these valuation problem areas with regards to their importance, affect and difficulty when valuing Ericsson. We have chosen to be DCF centric in this thesis, as the enterprise Discounted Cash Flow (DCF) valuation method is one of the most commonly used amongst financial analysts. The valuation problem areas and their indicators/factors served as a base for our questionnaire survey, which was used to collect information in this study. What is really compelling with the results is that they show clearly a tendency that the macroeconomic valuation problem area is less important, has less affect and is less difficult than other valuation problem areas, with regards to Ericsson’s valuation. Additionally, what we also found very interesting was that even though the financial analysts perceived the macroeconomic valuation problem area to have less importance it was perceived to have more affect on the valuation, which seems peculiar. With our study’s findings, from our empirical work analysis, it is only partly possible to explain the significant deviation occurrence, which was of approximately 160 percent, between the intrinsic value of Ericsson’s one-year historical stock price development, and the financial analysts’ forecasted target prices. We want to emphasise that there are other additional factors that also affect the stock price and consequently the Ericsson’s company value, which could also partly explain the substantial deviation occurrence that was discovered. This is also the reason why we could not explain the deviation exhaustively.
Place, publisher, year, edition, pages
IdentifiersURN: urn:nbn:se:su:diva-2490OAI: oai:DiVA.org:su-2490DiVA: diva2:191509