Read This to Understand Cisco Systems Stock

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.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.

IN FOCUS