A strong performer from today's morning trading session is Cisco Systems, whose shares rose 1.8% to $53.92 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
Cisco Systems's Valuation Is in Line With Its Sector Averages:
Cisco Systems, Inc. designs, manufactures, and sells Internet Protocol based networking and other products related to the communications and information technology industry in the Americas, Europe, the Middle East, Africa, the Asia Pacific, Japan, and China. The company belongs to the Telecommunications sector, which has an average price to earnings (P/E) ratio of 18.85 and an average price to book (P/B) ratio of 3.12. In contrast, Cisco Systems has a trailing 12 month P/E ratio of 19.3 and a P/B ratio of 5.2.
Cisco Systems's PEG ratio is 1.92, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
EPS Trend Sustained Primarily by Reducing the Number of Shares Outstanding:
| 2019-09-05 | 2020-09-03 | 2021-09-09 | 2022-09-08 | |
|---|---|---|---|---|
| Revenue (MM) | $51,904 | $49,301 | $49,818 | $51,557 |
| Gross Margins | 62.9% | 64.3% | 64.0% | 62.6% |
| Operating Margins | 27.4% | 27.6% | 25.8% | 27.1% |
| Net Margins | 22.39% | 22.75% | 21.26% | 22.91% |
| Net Income (MM) | $11,621 | $11,214 | $10,591 | $11,812 |
| Net Interest Expense (MM) | $449 | $335 | $184 | $116 |
| Depreciation & Amort. (MM) | -$1,897 | -$1,808 | -$1,862 | -$1,957 |
| Earnings Per Share | $2.61 | $2.64 | $2.5 | $2.79 |
| EPS Growth | n/a | 1.15% | -5.3% | 11.6% |
| Diluted Shares (MM) | 4,453 | 4,254 | 4,236 | 4,075 |
| Free Cash Flow (MM) | $16,718 | $16,017 | $16,118 | $13,612 |
| Capital Expenditures (MM) | -$887 | -$591 | -$664 | -$386 |
| Net Current Assets (MM) | -$16,467 | -$13,360 | -$17,110 | -$17,512 |
| Current Ratio | 1.51 | 1.72 | 1.49 | 1.43 |
| Long Term Debt (MM) | $14,475 | $11,578 | $9,018 | $8,416 |
| Net Debt / EBITDA | 1.17 | 0.26 | 0.24 | 0.22 |
Cisco Systems has strong margins with a stable trend and a steady stream of strong cash flows. Additionally, the company's financial statements display low leverage and wider gross margins than its peer group. However, the firm has EPS growth achieved by reducing the number of outstanding shares. Finally, we note that Cisco Systems has stable revenues and decreasing reinvestment in the business and just enough current assets to cover current liabilities.
