Is Cisco Systems Still a Good Value After 35% Surge Ahead of 2025?

Trying to figure out what to do with Cisco Systems stock? You are not alone. The stock is fresh off a year where it soared 35.8%, giving long-term holders a tidy 84.9% gain over the past five years. Even with a recent one-month dip of -2.3% and some sideways trading, Cisco has quietly built up 13.6% gains so far this year. Over the past week, shares nudged higher by 0.3%, once again demonstrating that this is a company investors really like to keep on their radar.

These moves have come despite a pretty mixed landscape in tech and in the broader economy. Even as headlines swirl about banking sector risks or shifting market winds in fintech and crypto, Cisco has mostly skirted controversy and quietly kept to its path. That stability seems to have caught investors’ attention, especially as risk perception has tilted in favor of large, established tech names. Cisco’s latest value score stands at 3 out of 6, based on key checks for undervaluation. This means it stacks up well in about half the categories that matter, but there is a lot more to consider if you are trying to benchmark Cisco against competitors or broader market valuations.

So let’s roll up our sleeves and look at exactly how Cisco’s business measures up, one valuation approach at a time. And stay tuned, because at the end, I will walk you through an even more insightful way to put all the pieces together.

Why Cisco Systems is lagging behind its peers

Approach 1: Cisco Systems Cash Flows

The Discounted Cash Flow (DCF) model is a classic approach for estimating a company's true value by projecting its future cash flows and discounting them back to their present value. For Cisco Systems, the latest figures show the company generated Free Cash Flow (FCF) of $13.4 Billion over the last twelve months.

Analysts expect Cisco's annual cash flow to rise steadily, reaching about $17.5 Billion by 2030. While most analyst estimates only extend five years, projections beyond that point are based on trend extrapolations. Together, these forecasts provide a long-range view of the company’s earning power.

When these future cash flows are added up and discounted to today’s dollars, the DCF model produces an estimated intrinsic value per share of $74.10. Given where the market price currently sits, this puts Cisco at 9.4% undervalued compared to its long-term cash flow potential. In other words, it is trading very close to its calculated fair value.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Cisco Systems.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Cisco Systems's DCF analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Cisco Systems Price vs Earnings

The Price-to-Earnings (PE) ratio is often the preferred valuation metric for profitable companies such as Cisco Systems, as it directly relates a company's share price to its earnings per share. This makes it a powerful tool for comparing established businesses that consistently generate profits.

The appropriate or “fair” PE ratio for a company depends on both future growth expectations and the perceived risk surrounding those earnings. Higher growth or greater earnings certainty often justifies a premium multiple, while slower growth or elevated risk call for a discount.

At present, Cisco trades at a PE ratio of 25x. This matches the communications industry average of 25x. However, it sits well below the peer average of 40x, suggesting that the market does not price Cisco at a premium compared to some competitors.

Simply Wall St’s Fair Ratio goes a step further by considering a range of company-specific factors, such as Cisco’s earnings growth prospects, profit margins, size, and risk profile. This makes the Fair Ratio, currently at 27x, a more thorough yardstick than just comparing to industry or peers.

Comparing Cisco’s actual PE of 25x with the Fair Ratio of 27x, these figures are closely aligned. This indicates that, by this measure, the stock is valued about right based on its fundamentals and outlook.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Cisco Systems Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your personalized story about a company, where you connect your view of its future, such as revenue, profits, and margins, to your assessment of its fair value, and back your view with numbers that reflect your expectations. Narratives go beyond ratios and formulas by giving context to the numbers and linking your unique perspective to a real financial forecast. This makes investment decisions more meaningful and grounded in your beliefs. On Simply Wall St’s Community page, millions of investors use Narratives as an easy, interactive tool that lets them visualize how their assumptions compare to market prices and other investors’ views. Narratives are always up to date, automatically reflecting changes when new company news or earnings are released, so you’re never making decisions with stale data. For instance, some investors see Cisco’s fair value as high as $87 based on optimistic growth in AI and cloud, while others are more cautious, estimating it as low as $61. Narratives help you decide whether to buy, sell, or hold by clearly showing how fair value compares to today’s share price and what story underpins that view.

Do you think there's more to the story for Cisco Systems? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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