Cisco Systems shares fell by -1.4% during the day's morning session, and are now trading at a price of $53.38. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
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 17.4 and a P/B ratio of 4.89.
Cisco Systems's PEG ratio is 2.07, 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.
Wider Gross Margins Than the Industry Average of 53.85%:
| 2017-09-07 | 2018-09-06 | 2019-09-05 | 2020-09-03 | 2021-09-09 | 2022-09-08 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $48,005 | $49,330 | $51,904 | $49,301 | $49,818 | $51,557 |
| Gross Margins | 63.0% | 62.0% | 63.0% | 64.0% | 64.0% | 63.0% |
| Operating Margins | 25% | 25% | 27% | 28% | 26% | 27% |
| Net Margins | 20.0% | 0.0% | 22.0% | 23.0% | 21.0% | 23.0% |
| Net Income (MM) | $9,609 | $110 | $11,621 | $11,214 | $10,591 | $11,812 |
| Net Interest Expense (MM) | $477 | $565 | $449 | $335 | $184 | $116 |
| Depreciation & Amort. (MM) | -$2,286 | -$2,192 | -$1,897 | -$1,808 | -$1,862 | -$1,957 |
| Earnings Per Share | $1.9 | $0.02 | $2.61 | $2.64 | $2.5 | $2.82 |
| EPS Growth | n/a | -98.95% | 12950.0% | 1.15% | -5.3% | 12.8% |
| Diluted Shares (MM) | 5,049 | 4,881 | 4,453 | 4,254 | 4,236 | 4,192 |
| Free Cash Flow (MM) | $14,833 | $14,441 | $16,718 | $16,017 | $16,118 | $13,612 |
| Capital Expenditures (MM) | -$957 | -$775 | -$887 | -$591 | -$664 | -$386 |
| Net Current Assets (MM) | $20,022 | -$3,743 | -$16,467 | -$13,360 | -$17,110 | -$17,512 |
| Long Term Debt (MM) | $25,725 | $20,331 | $14,475 | $11,578 | $9,018 | $8,416 |
| Net Debt / EBITDA | -2.58 | -1.45 | -0.54 | -0.96 | -0.88 | -0.61 |
Cisco Systems has strong margins with a stable trend and low leverage. Additionally, the company's financial statements display wider gross margins than its peer group and positive EPS growth. Furthermore, Cisco Systems has weak revenue growth and a flat capital expenditure trend, irregular cash flows, and just enough current assets to cover current liabilities.
