CSCO  Cisco Systems Inc.

Exchange

NASDAQ

Sector

Technology

Industry

Computer Communications Equipment

Market Cap.

157.50B

Vuru Grade

79.14/100

Current Price

$31.50
+0.06 (+0.19%)

Growth Price

$31.27
Fairly valued

Stability Price

$9.80
Overvalued by 68.88%

Company Metrics

  • P/E 15.99
  • P/S 3.24
  • P/B 2.4
  • EPS 1.97
  • Cash ROIC 38.82%
  • Cash Ratio 2.64
  • Dividend 1.16 / 3.68%
  • Avg. Vol. 19.80M
  • Shares 5.00B
  • Market Cap. 157.50B

Company Description

Cisco Systems, Inc. designs, manufactures, and sells Internet protocol (IP)-based networking and other products related to the communications and information technology industry worldwide. It offers routers that interconnect public and private IP networks for mobile, data, voice, and video applications; switching products, which offer connectivity to end users, workstations, IP phones, access poin... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

Cisco: Decision Brings Prospect Of Further Loss
Seeking Alpha - 7 hours ago
A recent adverse trial decision rendered in a patent case appeal brought by Arista Networks Inc. (NYSE:ANET) may portend further loss of revenue and market share for Cisco Systems Inc. (NASDAQ:CSCO), and confirms their sell rating. The downturn in the ...
Cisco: $40 Per Share Is Possible
Seeking Alpha - 18 hours ago
The Microsoft-type recovery investors continue to expect from Cisco is not as misguided as some critics might want longs to believe.
Perfect Buying Opportunity For Cisco
Seeking Alpha - 14 hours ago
After Cisco's (NASDAQ:CSCO) last earnings release, it was clear that investors were far from pleased with what management had to say.
Why I'm Not Buying Cisco On The Dip
Seeking Alpha - May 24, 2017
CSCO is more attractive to me now, 8% cheaper than it was a week ago, but I still don't think the stock is cheap. My current cost average on CSCO is $23.80 and I would like to add to this position in the $28 area.
Cisco Systems: In The Bin, But No Bargain
Seeking Alpha - May 22, 2017
Back on February 19th, I recommended taking some Cisco Systems (NASDAQ:CSCO) off the table. At the time, shares had risen well above their average ten-year valuation, and the company's ongoing transition to software and services meant four or five ...
Checking the Overall Picture for Cisco Systems, Inc. (CSCO) - StockNewsJournal
Cisco Systems: A Better Bargain Than Ever? - GuruFocus.com
Cisco revenue forecast disappoints; says to cut 1100 more jobs
Reuters - May 17, 2017
Cisco Systems Inc (CSCO.O) forecast current-quarter revenue that widely missed analysts' estimates and said it would cut 1,100 more jobs, as the world's largest networking gear maker steps up efforts to transform into a software-focused company.
This Company Has The World's Strongest Moat - Seeking Alpha
Why Cisco Systems, Inc. Shareholders Have Something to Worry About
Motley Fool - May 4, 2017
That's why its annual revenue rose from $28.5 billion to $49.2 billion between fiscal 2006 and 2016. But as tech companies become bigger and older, they become more vulnerable to disruptive new technologies.
Traders Secrets on Cisco Systems, Inc. (CSCO), Aetna Inc. (AET) - StockNewsJournal
8 Reasons You Should Add Cisco Systems To Your Portfolio - Seeking Alpha
Better Buy: Cisco Systems, Inc. vs. Oracle Corporation
Motley Fool - May 10, 2017
I compared these two stocks last October, and concluded that Cisco's lower valuation, higher dividend, and heavier use of free cash flow on acquisitions and dividends made it a better buy than Oracle.
First National Bank & Trust Co. of Newtown Has $279000 Stake in Cisco Systems ... - Sports Perspectives
Analysts Recommendation on: Cisco Systems, Inc. (NASDAQ:CSCO) - ExpertGazette
Cisco Systems' stock climbs within range of a 16-year high after analyst upgrade
MarketWatch - May 15, 2017
Shares of Cisco Systems Inc. CSCO, +0.19% surged 2.5% in afternoon trade Monday, after Morgan Stanley upgraded the networking giant, citing expectations for an improved replacement cycle in switches and optimism over potential tax policy changes.
For Cisco Systems Recurring Revenue Is The Thing To Watch
Seeking Alpha - May 22, 2017
CSCO is still well below my buy price of $41, which is based on the dividends it will pay in the future. Cisco Systems, Inc. (NASDAQ:CSCO) is a company that produces network products that are ubiquitous. The dividend stream I think it can support more ...
Analysts' Activity to Watch: Cisco Systems, Inc. (NASDAQ:CSCO) - ExpertGazette
This Is What The Chart For Cisco Systems, Inc. (CSCO) Is Showing Today - NY Stock News
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for CSCO to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate CSCO's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$31.50 Current Price

$31.27 Growth Price (DCF)

Fairly valued


Growth Rate Assumed by Market: 4.09%


Future Free Cash Flow Growth Rate: 3.8%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$9.80 Stability Price (EPV)

Overvalued by 68.88%


Discount Rate: 15.0%

$4.13 NCA Price

Overvalued by 86.89%

$35.89 Book Price

Undervalued by 13.94%


Excellent Cash Return on Invested Capital over the past 5 years

CSCO has efficiently invested its financial resources in buildings, projects, and equipment, resulting in strong returns. Annual Reports can be useful in identifying the cause of one-time events and future sustainability.

CSCO has created $38.82 of cash for every $100 invested.
Figures in USD. Fiscal year ends in July
20122013201420152016
Free Cash Flow 10.37B 11.73B 11.06B 11.33B 12.42B
divided by
Invested Capital 25.31B 28.39B 33.25B 29.44B 30.99B
Cash ROIC 40.95% 41.33% 33.25% 38.47% 40.10%

Excellent Return on Equity over the past 5 years

Over the past 5 years, CSCO has generated strong profits with money shareholders have invested. This is considered one of the best indicators of quality management. Beware of extremely high Return on Equity (> 50%) as this is often unsustainable.

CSCO has generated $15.67 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in July
20122013201420152016
Net Income 8.04B 9.98B 7.85B 8.98B 10.74B
divided by
Stockholders' Equity 51.29B 59.12B 56.65B 59.70B 63.59B
Return on Equity 15.68% 16.89% 13.86% 15.04% 16.89%

Excellent Business Performance over the past 10 years

CSCO has been able to maintain profitability in good times and bad. This could mean CSCO has an extremely strong business or has the ability to scale down costs when needed. This should be a fairly resilient business, but double check for future sustainability by looking at its Risk Factors in the Annual Report.

CSCO has created positive free cash flow for 9 or more of the past 10 years.
Figures in USD. Fiscal year ends in July
2007200820092010201120122013201420152016
Free Cash Flow 8.85B 10.82B 8.89B 9.17B 8.91B 10.37B 11.73B 11.06B 11.33B 12.42B

Very Strong Balance Sheet

CSCO has more Cash than its Total Liabilities, resulting in $1.54 Net Cash per share. In other words, if you buy CSCO today, the price you're paying for shares is actually $29.96 because $1.54 of Cash is included in the current share price. This much Cash is very healthy. It can help CSCO sustain itself in the face of any economic turmoil and makes a stock buyback more of a possibility.
Figures in USD. Fiscal year ends in July
2007200820092010201120122013201420152016
Cash 22.27B 26.24B 35.00B 39.86B 44.59B 48.72B 50.61B 52.07B 60.42B 65.76B
Current Assets 31.57B 35.70B 44.18B 51.42B 57.23B 61.93B 65.52B 67.11B 76.28B 78.72B
Total Assets 53.34B 58.73B 68.13B 81.13B 87.10B 91.76B 101.19B 105.13B 113.48B 121.65B
Current Liabilities 13.36B 13.86B 13.66B 19.23B 17.51B 17.73B 22.19B 19.81B 23.62B 24.91B
Total Liabilities 21.86B 24.38B 29.48B 36.86B 39.87B 40.47B 42.07B 48.48B 53.78B 58.07B
Stockholder' Equity 31.48B 34.35B 38.65B 44.27B 47.23B 51.29B 59.12B 56.65B 59.70B 63.59B
Current Ratio 2.36 2.58 3.24 2.67 3.27 3.49 2.95 3.39 3.23 3.16
TL-to-TA 0.41 0.42 0.43 0.45 0.46 0.44 0.42 0.46 0.47 0.48

Consistent Reinvestment of Profits over the past 10 years

CSCO has consistently retained profits. This may put CSCO in a strong position to invest for the future, by buying new machinery, investing in R&D or a number of other options. By effectively using these earnings, CSCO can greatly improve their long-term economic picture.
Figures in USD. Fiscal year ends in July
2007200820092010201120122013201420152016
Retained Earnings 231.00M 120.00M 3.87B 5.85B 7.28B 11.35B 16.22B 14.09B 16.05B 19.40B
Retained Earnings Growth - -48.05% 3,123.33% 51.27% 24.49% 55.88% 42.81% -13.09% 13.85% 20.89%

Potential Competitive Advantage over the past 10 years

CSCO potentially has a competitive advantage. This could be strong branding, the ability to keep costs low, or some other characteristic that is hard to replicate. Look at its future prospects to determine sustainability and whether the economic moat will strengthen.

$18.75 of every $100 of Revenue have been pure profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in July
2007200820092010201120122013201420152016
Net Income 7.33B 8.05B 6.13B 7.77B 6.49B 8.04B 9.98B 7.85B 8.98B 10.74B
divided by
Revenue 34.92B 39.54B 36.12B 40.04B 43.22B 46.06B 48.61B 47.14B 49.16B 49.25B
Net Profit Margin 21.00% 20.36% 16.98% 19.40% 15.02% 17.46% 20.54% 16.66% 18.27% 21.81%

Strong Pricing Power over the past 10 years

CSCO has maintained substantial gross margins, suggesting that they have been able to set prices without consideration of the cost of goods sold. This potentially leaves flexibility in inflationary environments to raise prices on consumers and maintain profitability.

$62.18 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in July
2007200820092010201120122013201420152016
Gross Profit 22.34B 25.48B 23.09B 25.64B 26.54B 28.21B 29.44B 27.77B 29.68B 30.96B
divided by
Revenue 34.92B 39.54B 36.12B 40.04B 43.22B 46.06B 48.61B 47.14B 49.16B 49.25B
Gross Margin 63.96% 64.45% 63.94% 64.04% 61.40% 61.24% 60.57% 58.91% 60.38% 62.87%

Low Capital Intensity over the past 10 years

CSCO has consistently used a small portion of their Net Income buying new equipment or investing in new facilities. This indicates that CSCO may require minimal investment to stay competitive. This leaves them with extra money to spend on growing their business and potentially buying back stock.

14.65% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in July
2007200820092010201120122013201420152016
Capital Expenditure 1.25B 1.27B 1.01B 1.01B 1.17B 1.13B 1.16B 1.28B 1.23B 1.15B
divided by
Net Income 7.33B 8.05B 6.13B 7.77B 6.49B 8.04B 9.98B 7.85B 8.98B 10.74B
Capital Expenditure Ratio 17.06% 15.75% 16.38% 12.98% 18.09% 14.00% 11.62% 16.24% 13.66% 10.67%

No Dividend History over the past 10 years

CSCO has never distributed dividends or has recently suspended their dividend distribution.
Figures in USD. Fiscal year ends in July
2007200820092010201120122013201420152016
Dividend Paid - - - - - - - - - -
divided by
Shares Outstanding 6.27B 6.16B 5.86B 5.85B 5.56B 5.40B 5.38B 5.28B 5.15B 5.09B
Dividend Paid Per Share - - - - - - - - - -
Price at Year End 27.16 16.00 23.83 19.94 18.02 19.45 22.25 28.37 27.53 30.22
Dividend Yield - - - - - - - - - -

Strong History of Stock Buybacks over the past 10 years

CSCO has a strong history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in July
2007200820092010201120122013201420152016
Shares Outstanding 6.27B 6.16B 5.86B 5.85B 5.56B 5.40B 5.38B 5.28B 5.15B 5.09B
Stock Bought Back - 1.66% 5.22% 0.15% 5.12% 2.94% 0.45% 1.87% 2.62% 1.14%
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Discussion
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3
Posted by hurling  (on April 23, 2012)
As of today based on the fundamentals CSCO would be fairly valued at $31.07. I would put a one year target on the stock of $32.75 based on expected growth and acquisitions.

You are looking at a company with very little debt and a large moat. Cisco remains the industry standard in networking and IP phones. They continue to be one of the leaders in firewalls. The Cisco UCS product has put them in the top three for servers. This is an extremely profitable market and the server market should continue to grow due to the fact that servers have a specific lifespan (so there's a built in replacement factor) as well as the fact that computing environments continue to need more resources.
1
Posted by timholland  (on April 25, 2012)
I agree. CSCO is a great company. But, what assumptions are you using to get your $31 price target?

To hit it, i'm having to move the annual growth rate up to 15%.
1
Posted by hurling  (on April 25, 2012)
$31.07 was my fair value estimate based on the fundamentals and a growth rate of 9.4 percent as well as a fair estimate of patent values and cash/invested income on hand. On a straight valuation I calculate the company to be worth $23.50 a share.
1
Posted by ValueHunter  (on August 3, 2016)
Better Buy: Cisco Systems vs. Oracle

http://www.fool.com/investing/2016/07/26/better-buy-cisco-systems-vs-oracle.aspx
0
Posted by NYZ93  (on May 8, 2012)
Earnings are expected to be positive. We'll see
0
Posted by Robert.T  (on March 18, 2012)
Fairly valued at best. Not the most exciting company too. The run is over. Anyone who thinks this will hit $30 is crazy.
7
Posted by formerhedgie  (on March 19, 2012)
Disagree. Historically, it’s traded at a way higher multiple than it is currently. CSCO’ll hit $30 no problem. High quality companies with a large market cap get huge volume. The market will move on this stock.
2
Posted by James.H  (on June 25, 2012)
Hi Robert,

How are you calculating the fair value?
-6
Posted by maryabrooks41  (on June 26, 2012)
If i wanna invest in this business how and like how much i will get to invest and how much would be my income