What Are the Fundamentals Of CSCO?

Cisco Systems logged a -0.6% change during today's morning session, and is now trading at a price of $49.93 per share.

Cisco Systems returned gains of 6.1% last year, with its stock price reaching a high of $58.19 and a low of $45.56. Over the same period, the stock underperformed the S&P 500 index by -18.0%. As of April 2023, the company's 50-day average price was $50.99. 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. Based in San Jose, CA, the large-cap Telecommunications company has 84,900 full time employees. Cisco Systems has offered a 3.1% dividend yield over the last 12 months.

The Company's Revenues Are Declining:

2018 2019 2020 2021 2022 2023
Revenue (MM) $49,330 $51,904 $49,301 $49,818 $51,557 $56,998
Revenue Growth n/a 5.22% -5.02% 1.05% 3.49% 10.55%
Operating Margins 26% 28% 28% 27% 28% 27%
Net Margins 0% 22% 23% 21% 23% 22%
Net Income (MM) $110 $11,621 $11,214 $10,591 $11,812 $12,613
Net Interest Expense (MM) $943 $859 $585 $434 $508 $427
Depreciation & Amort. (MM) $221 $150 $141 $215 $313 $282
Earnings Per Share $0.02 $2.61 $2.64 $2.5 $2.82 $3.0700000000000003
EPS Growth n/a 12950.0% 1.15% -5.3% 12.8% 8.87%
Diluted Shares (MM) 4,881 4,453 4,254 4,236 4,192 4,105
Free Cash Flow (MM) $12,832 $14,922 $14,656 $14,762 $12,749 $19,037
Capital Expenditures (MM) $834 $909 $770 $692 $477 $849
Current Ratio 2.11 1.7 1.59 1.62 1.45 1.47
Total Debt (MM) $16,239 $9,563 $5,780 $949 $8,878 $1,768
Net Debt / EBITDA -2.13 -2.37 -0.36 -1.59 -0.65 -1.35

Cisco Systems has strong margins with a stable trend, exceptional EPS growth, and low leverage. However, the firm suffers from weak revenue growth and decreasing reinvestment in the business and irregular cash flows.

A Very Low P/E Ratio but Trades Above Its Graham Number:

Cisco Systems has a trailing twelve month P/E ratio of 15.4, compared to an average of 23.78 for the Telecommunications sector. Based on its EPS guidance of $3.69, the company has a forward P/E ratio of 13.8. According to the 110.7% compound average growth rate of Cisco Systems's historical and projected earnings per share, the company's PEG ratio is 0.14. Taking the weighted average of the company's EPS CAGR and the broader market's 5-year projected EPS growth rate, we obtain a normalized growth rate of 11.7%. On this basis, the company's PEG ratio is 1.32. This implies that the shares are fairly valued. In contrast, Cisco Systems is likely overvalued compared to the book value of its equity, since its P/B ratio of 4.47 is higher than the sector average of 3.46. The company's shares are currently trading 80.7% above their Graham number. Ultimately, Cisco Systems's strong cash flows, decent earnings multiple, and healthy debt levels factor towards it being fairly valued, its elevated P/B ratio notwithstanding.

Cisco Systems Has an Analyst Consensus of Little Upside Potential:

The 16 analysts following Cisco Systems have set target prices ranging from $39.47 to $69.76 per share, for an average of $49.56 with a hold rating. As of April 2023, the company is trading 2.9% away from its average target price, indicating that there is an analyst consensus of little upside potential.

Cisco Systems has a very low short interest because 1.1% of the company's shares are sold short. Institutions own 77.3% of the company's shares, and the insider ownership rate stands at 0.07%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 9% stake in the company is worth $19,155,228,101.

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.