What happened

Shares of Telefonaktiebolaget LM Ericsson (ERIC) fell hard on Thursday, following a third-quarter earnings report that fell short of market expectations. Ericsson's stock traded 15.1% lower at 1:20 p.m. ET, having fallen as much as 19.5% earlier in the day.

So what

The Swedish maker of telecom-grade networking equipment saw Q3 sales rise 21% year over year to SEK 68 billion ($6 billion). Organic sales, adjusted for currency exchange effects and the recently closed acquisition of cloud-based communications expert Vonage, increased by 3% from the year-ago period. Earnings stopped at SEK 1.56  ($.14) per diluted share, down from SEK 1.73 ($.15) in Q3 2021.

Now what

The reported figures looked strong, but most of the revenue growth rested on acquisitions and "a large currency tailwind." The same currency effects also increased Ericsson's operating expenses and cost of goods sold, which resulted in management announcing a cost-cutting program.

The company maintained the strategic target of 2024 operating margins in the range of 15% to 18%. In this report, that margin stood at 11.4%. Ericsson has some work to do in order to reach that multiyear goal. Today, investors didn't feel that the reported results will lead to profitable growth in the near term.

That being said, Ericsson shares are now trading at five-year lows despite the robust long-term value of 5G wireless network installations. This stock looks ready to make you money over the next five years if you buy in at this muffled valuation.

ERIC PE Ratio (Forward) Chart

ERIC PE Ratio (Forward) data by YCharts.