Why Cisco Systems, Inc. (NASDAQ:CSCO) Could Be Worth Watching

Let’s talk about the popular Cisco Systems, Inc. (NASDAQ:CSCO). The company’s shares saw a decent share price growth in the teens level on the NASDAQGS over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Cisco Systems’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Cisco Systems

Is Cisco Systems still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 4.0% below my intrinsic value, which means if you buy Cisco Systems today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $50.87, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Cisco Systems’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Cisco Systems generate?

NasdaqGS:CSCO Past and Future Earnings, January 26th 2020
NasdaqGS:CSCO Past and Future Earnings, January 26th 2020

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Cisco Systems’s earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in CSCO’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on CSCO, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Cisco Systems. You can find everything you need to know about Cisco Systems in the latest infographic research report. If you are no longer interested in Cisco Systems, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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