Nokia Stock: Looks Undervalued Despite High Competition

Nokia (NOK) is a multinational telecommunications company that was formed in 1865 in Finland. In addition to telecommunications, Nokia also operates in the consumer electronics and information technology industries. The company was natively called Nokia Oyj but has since changed its name.

Nokia is currently headquartered in Espoo, Finland, and has been operating in approximately 130 locations around the world. Nokia Corporation also offers several cloud-based, fixed, and mobile solutions to its consumers with a primary focus on sustainability, productivity, and inclusivity. The company has partnered with popular business tycoons, including Microsoft (MSFT), to expand its product offerings and overall business.

I am bullish on Nokia as it looks attractively priced relative to its historical averages, Wall Street analysts are bullish on it, and its average price target implies substantial upside potential.

Strengths

According to a 2020 report, Nokia’s total number of full-time employees surpassed 92,000, making it one of the most noteworthy employers around the globe. Additionally, its operations in 130+ locations have helped the company establish an unrivaled global footprint and further nurture its partnerships, such as that with Microsoft.

Nokia has been able to produce a strong brand image and brand name, fostering loyal, long-term customers around the globe. Its mobile devices have particularly made their mark as some of the most durable, creative, and reliable devices in the world.

As a part of its acquisition deal with Microsoft, the company’s highly-skilled teams of experts have teamed with the latter company’s experts. This partnership has enabled the company to accelerate its growth and expansion for the long term.

Recent Results

In Q4 of 2021, Nokia was able to generate net sales equaling €6.4 billion, which was a slight decrease from Q4 2020 net sales of €6.55 billion – leading to a -2% year-over-year change. The total year-over-year change for the 12 months ending in Q4 of 2021 was +2%, and the total net sales equaled €22.2 billion.

The operating profit for 12 months resulted in a 144% jump, with the total reaching €2.16 billion and the operating margin reaching 12.5%, a 300 basis point improvement. The diluted earnings per share for the quarter reached €0.12, and the fiscal year report’s diluted EPS was €0.29.

Valuation Metrics

NOK stock looks undervalued here, as it trades below its historical valuation multiple averages on a forward EV/EBITDA ratio and a forward price-to-normalized-earnings ratio. Its forward EV/EBITDA ratio is 6.7 times compared to its historical average of 7.70 times, and its forward price-to-normalized-earnings ratio is 12.8 times compared to its historical average of 17.3 times.

Moving forward, analysts expect EBITDA to increase by 4.9% and normalized earnings per share to increase by 5.6% over the next twelve months.

Wall Street’s Take

According to Wall Street analysts, NOK stock earns a Strong Buy consensus rating based on four Buys, one Hold, and zero Sell ratings assigned in the past three months. Additionally, the average Nokia price target of $7.57 puts the upside potential at 33.8%.

Summary and Conclusions

NOK stock looks attractively priced based on numerous metrics. First of all, it trades at a discount to its historical valuation multiple averages, Wall Street analysts are generally bullish on it, and the average price target implies substantial upside potential over the next 12 months.

That said, NOK operates in a sector that is highly competitive and also faces potential technological disruption. It also generally requires substantial capital expenditures to maintain its operations. Overall, however, it looks like it might be a good time for investors to consider adding shares.

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