Is Now the Right Time to Reassess Cisco After Shares Near All-Time Highs?

Are you wondering whether now is the right time to make a move on Cisco Systems stock? You are certainly not alone. With shares recently closing at $68.31 and notching a 1.6% return in the last week, it is clear there is real momentum behind Cisco right now. This momentum has also shown itself in the longer term, with the stock delivering a 32.8% return over the past year, a striking 85.2% over three years, and nearly doubling over five years with a 98.7% gain. Clearly, the market’s perception of Cisco’s growth prospects and risk profile has been evolving.

Some of these gains can be traced back to shifting investor sentiment, as Cisco’s role in global enterprise tech becomes only more relevant. Macroeconomic news about rebounding merger activity and a positive policy outlook in the U.S. may also be fueling investor optimism across the sector, prompting a fresh look at established giants like Cisco. Still, with the stock sitting close to multi-year highs, it is natural to wonder whether Cisco is actually undervalued or if these gains are already reflected in the price.

To give you a sense of where things stand: on a six-factor valuation check, Cisco passes four out of six, notching a value score of four. That suggests the company looks attractively priced on most measures, but not all. Curious about what these valuation checks cover and which ones Cisco is excelling at? Here is a breakdown of the numbers and an exploration of each approach, before introducing an even sharper lens for understanding what Cisco is worth right now.

Why Cisco Systems is lagging behind its peers

Approach 1: Cisco Systems Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its expected future cash flows and discounting those back to their present value. For Cisco Systems, the DCF approach uses the company’s current Free Cash Flow, which stands at $13.37 billion, as a starting point. Analysts forecast Cisco’s annual Free Cash Flow to gradually increase over the next five to ten years, with projections reaching $18.60 billion by 2035, according to extrapolations.

It is important to note that while direct analyst estimates are available through 2030, later figures rely on systematic extrapolation. Overall, the model reflects moderate growth and stability in Cisco’s capacity to generate cash. This is a healthy indicator for investors looking for predictability.

Based on this 2 Stage Free Cash Flow to Equity model, Cisco’s intrinsic value is estimated at $70.59 per share. With the current share price around $68.31, the DCF model suggests Cisco is trading at a slight 3.2% discount to its calculated fair value. In other words, the stock appears to be fairly valued with only a modest margin of undervaluation.

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 valuation analysis on every stock in the world every day (check out Cisco Systems's valuation 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 (PE)

The Price-to-Earnings (PE) ratio is a widely used metric when valuing profitable businesses like Cisco Systems. It relates a company's share price directly to its per-share earnings. A lower PE can indicate a stock is undervalued, while a higher PE sometimes signals expectations for higher future growth. However, what counts as a “normal” PE varies based on the company’s growth outlook, risk profile, and how it compares to its industry and the broader market.

Right now, Cisco trades at a PE ratio of 26.5x. This is below the industry average for Communications companies, which is 30.1x, and it is significantly under the peer group average of 75.4x. At first glance, Cisco's valuation might appear conservative compared to its peers.

Simply Wall St’s proprietary Fair Ratio for Cisco takes into account the company’s earnings growth, industry dynamics, profit margin, market cap, and risk factors, and is calculated at 32.8x. Unlike basic peer or industry comparisons, the Fair Ratio provides a more customized view of what Cisco "should" be valued at, drawing from both company-specific and sector-level insights.

Comparing Cisco’s actual PE of 26.5x to its Fair Ratio of 32.8x, Cisco appears to be trading at a modest discount, but the difference is not significant enough to strongly declare it under- or overvalued. Instead, the stock seems fairly priced for current conditions.

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 us introduce you to Narratives. A Narrative is the story that sits behind an investment: your perspective on where Cisco is headed, why, and how those views connect to financial forecasts such as revenue or profit margins. On Simply Wall St’s Community page, exploring Narratives is as easy as reading the headlines. You can review various outlooks and see the numbers that support them, all built by millions of investors like you.

A Narrative links Cisco’s business story directly to assumptions about its future performance, which then translates to a fair value estimate. Because these Narratives update automatically when new news, earnings, or forecasts arrive, they stay relevant and dynamic. With them, you can instantly compare what you believe Cisco is worth to the current share price, helping you decide if it is time to buy, hold, or sell.

For example, some investors currently see Cisco’s fair value as high as $87.00, driven by strong AI and security momentum, while others are more cautious, estimating fair value closer to $61.00 due to competitive and market risks. Whether optimistic or conservative, Narratives let you justify your decision in the context of your own research, making the investment process both smarter and easier.

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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