Cisco Systems (NasdaqGS:CSCO) - Share price, News & Analysis

Q: What is the Fair Price of CSCO when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

CSCO ($42.69) is trading below our estimate of [[fair value]] ($101.68)

CSCO fundamental analysis
Snowflake Score
Valuation	5/6
Future Growth	2/6
Past Performance	5/6
Financial Health	6/6
Dividends	5/6

CSCO Stock Overview

Rewards

Trading at 58% below our estimate of its fair value

Earnings are forecast to grow 5.14% per year

Earnings have grown 16.1% per year over the past 5 years

Pays a reliable dividend of 3.56%

Risk Analysis

No risks detected for CSCO from our risk checks.

Cisco Systems Competitors

Motorola Solutions

NYSE:MSI

US$35.5b

Arista Networks

NYSE:ANET

US$30.4b

Ubiquiti

NYSE:UI

US$15.2b

Juniper Networks

NYSE:JNPR

US$9.1b

Price History & Performance

Summary of all time highs, changes and price drops for Cisco Systems
Historical stock prices
Current Share Price	US$42.69
52 Week High	US$64.29
52 Week Low	US$40.82
Beta	0.98
1 Month Change	-5.82%
3 Month Change	-21.86%
1 Year Change	-19.85%
3 Year Change	-25.28%
5 Year Change	37.00%
Change since IPO	55,157.13%

Recent News & Updates

Jul 05

Is Cisco Systems (NASDAQ:CSCO) Using Too Much Debt?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of...

Jul 01

Cisco Systems: Time To Buy

Cisco is the market leader in Internet Protocol networking for both hardware and software. Cisco's stock price is down due to the bear market and weak quarterly results. The company is a Dividend Contender. The yield is 3.5%+ and well covered by earnings, FCF, and a solid balance sheet. The stock is undervalued. The bear market is making retail and professional investors nervous, but the market will not be down forever. For those who have lived through the dot-com crash and sub-prime mortgage crisis, we know bear markets can last many months, but stock markets eventually reverse course. However, the bear market creates opportunities for many to follow a dividend growth investing strategy. Similarly, investors seeking income from high-yield stocks are likely to buy too. One stock that should be near the top of your list to buy is Cisco Systems, Inc. (CSCO), the networking giant. The company is now yielding 3.5%+, and the dividend continues to grow annually. Cisco is a Dividend Contender with 12 years of raises. The bear market, combined with weak Q3 2022 results and guidance, has punished the stock, which is down (-32.5%) year-to-date. The valuation is down 12.7X. I view Cisco as a long-term buy. Overview of Cisco Cisco traces its founding back to 1984, when it created its first router. The company snowballed and had the highest market capitalization during the dot-com boom. Today, Cisco designs, manufactures, and sells Internet Protocol networking equipment. Its products include routers, storage, switches, wireless, cybersecurity software, etc. The company sells its products in several categories: Secure, Agile Networks, Internet for the Future, Collaboration, End-to-End Security, Optimized Application Experiences, Other Products, and Services. The company operates globally and is the market leader for networking. Interbrand ranks Cisco as the No. 16 global brand. Total revenue was $49,818 million in fiscal 2021 and $51,581 million in the last twelve months. Revenue is roughly divided into 75% product and 25% service. Recent Quarterly Results The company reported Q3 2022 results below expectations. Cisco still reported growth in some product categories, but revenue was flat, as seen in the chart below. In addition, total subscription revenue declined and was a lower percentage of total revenue, suggesting customers were not renewing subscriptions and migrating to competitors. CSCO Investor Relations CSCO Investor Relations The main problem was that growth was slowing and forward guidance for the fiscal year was lower. Cisco's total orders for the quarter were up 8% but were lower than the 33% increase in the second quarter. Even after accounting for the loss of demand in Russia and COVID-19 lockdowns in China, this decline was significant. Furthermore, Cisco's enterprise product orders showed no growth. Demand will likely be reduced further in Q4 FY 2022 because of the war in Ukraine and continued lockdowns in China that are only now being lifted. Furthermore, Cisco lowered its FY 2022 guidance to $3.29 to $3.37 per share from $3.41 to $3.46 per share, adding to investor concerns. Cisco's Growth Despite the slowing demand, Cisco continues to grow organically and by acquisitions over longer periods. The company is the market leader for IP networking hardware and software. Few companies can provide comprehensive end-to-end solutions for networking like Cisco. However, organic growth is hard to come by because the market is not growing as fast as it once was. Competition from other networking or security companies is intense. Arista Networks and Juniper have increasingly provided products that are attracting customers. Additionally, cloud service providers offer overlapping services, reducing organizations' need to operate data centers. Hence, Cisco has grown mainly through acquisitions. The company uses its prodigious cash flow to make tuck-in acquisitions filling out its hardware and software lines. In 2020, Cisco made nine acquisitions, including Dashbase, Slido, IMImobile, Banzai Cloud, Portshift, BabbleLabs, Modcam, ThousandEyes, and Fluidmesh Networks. In 2021, it acquired six companies, including Reflex, Epsagon, Involvio, Kenna Security, Socio Lab, and Sedona Systems. So far, in 2022, Cisco has made one acquisition, Opsani. The result is that Cisco's revenue, operating income, and operational cash flow are growing slowly. Dividend Analysis Cisco is a dividend growth stock with a 3.5%+ dividend yield. In addition, the company has raised the dividend for 12 years after initiating one in 2011, making the stock a Dividend Contender. The forward dividend yield is now approximately 3.56%, based on an annual dividend rate of $1.52 per share. The combination of dividend yield and growth makes the stock attractive for many. Portfolio Insight Cisco last raised the quarterly dividend in February 2022 to $0.38 from $0.37 per share. The trailing dividend growth rate is 8.23% CAGR in the past five years and 23.37% in the past ten years. After a high initial growth rate, it slowed as the payout ratio increased. However, the relatively conservative payout ratio of ~46% means future increases are probably in store. Portfolio Insight Cisco has solid dividend safety from the context of earnings, free cash flow ((FCF)), and the balance sheet. Consensus estimates in fiscal 2022 for Cisco are $3.36 per share, and the dividend is $1.52 per share. These numbers produce a payout ratio of ~46%. Our cutoff payout ratio is 65%, meaning Cisco's dividend is safe with a decent buffer. Cisco had approximately $13,553 million in FCF in the past 12 months. The dividend required around $6,219 million, giving a dividend-to-FCF ratio of ~46%. This value is well below our cutoff of 70%, meaning there is little risk of a dividend cut based on FCF. One of Cisco's strengths is its rock-solid balance sheet. At the end of Q3 FY 2022, Cisco had $1,000 million in current long-term debt and $8,425 million in long-term debt. Both total and net debt have declined in the past five years. Total debt was offset by $6,952 million in cash and equivalents and $13,156 million in short-term investments giving a net cash position. Interest coverage is roughly 39X. Cisco has an AA-/A1 high grade/upper-medium grade investment credit rating from S&P Global and Moody's. Debt is not concerning from the perspective of dividend safety. Valuation Cisco's stock price has struggled in 2022, down more than the S&P 500 Index and Nasdaq. However, the company has solid dividend and return perspectives. Cisco is trading at a forward P/E ratio of about 12.7X, at the lower end of its average range in the past ten years and below its range in the past 5-years. The consensus analyst 2022 earnings is now $3.36 per share. We will use 14X as a reasonable value for earnings multiple. This value is below the average in the past decade. However, we account for difficulty growing revenue and earnings per share combined with potentially lower demand in fiscal 2023.

Jun 21

The Trend Of High Returns At Cisco Systems (NASDAQ:CSCO) Has Us Very Interested

To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is...

Shareholder Returns

	CSCO	US Communications	US Market
7D	-0.4%	-0.09%	0.7%
1Y	-19.8%	-17.5%	-18.4%

Return vs Industry: CSCO underperformed the US Communications industry which returned -18.7% over the past year.

Return vs Market: CSCO underperformed the US Market which returned -18.4% over the past year.

Price Volatility

Is CSCO's price volatile compared to industry and market?
CSCO volatility
CSCO Average Weekly Movement	5.7%
Communications Industry Average Movement	8.3%
Market Average Movement	8.2%
10% most volatile stocks in US Market	16.9%
10% least volatile stocks in US Market	3.4%

Stable Share Price: CSCO is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 6% a week.

Volatility Over Time: CSCO's weekly volatility (6%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1984	79,500	Chuck Robbins	https://www.cisco.com

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. It provides infrastructure platforms, including networking technologies of switching, routing, wireless, and data center products that are designed to work together to deliver networking capabilities, and transport and/or store data. The company also offers collaboration products comprising unified communications, Cisco TelePresence, and conferencing, as well as the Internet of Things and analytics software.

Cisco Systems Fundamentals Summary

How do Cisco Systems's earnings and revenue compare to its market cap?
CSCO fundamental statistics
Market Cap	US$173.75b
Earnings (TTM)	US$12.01b
Revenue (TTM)	US$51.58b

14.7x

P/E Ratio

3.4x

P/S Ratio

Is CSCO overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
CSCO income statement (TTM)
Revenue	US$51.58b
Cost of Revenue	US$19.01b
Gross Profit	US$32.57b
Other Expenses	US$20.56b
Earnings	US$12.01b

Last Reported Earnings

Apr 30, 2022

Next Earnings Date

Aug 17, 2022

Earnings per share (EPS)	2.90
Gross Margin	63.14%
Net Profit Margin	23.28%
Debt/Equity Ratio	23.3%

How did CSCO perform over the long term?

See historical performance and comparison

Dividends

3.6%

Current Dividend Yield

52%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is CSCO undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

5/6

Valuation Score 5/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for CSCO?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for CSCO. This is calculated by dividing CSCO's market cap by their current preferred multiple.
What is CSCO's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$173.75b

CSCO key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	3.2x
Enterprise Value/EBITDA	10.2x
PEG Ratio	2.9x

Price to Earnings Ratio vs Peers

How does CSCO's PE Ratio compare to its peers?

CSCO PE Ratio vs Peers

The above table shows the PE ratio for CSCO vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	30.6x
MSI Motorola Solutions	28.6x	10.4%	US$35.5b
ANET Arista Networks	32.6x	11.1%	US$30.4b
UI Ubiquiti	34.4x	8.2%	US$15.2b
JNPR Juniper Networks	26.7x	11.7%	US$9.1b
CSCO Cisco Systems	14.7x	5.1%	US$173.8b

Forward PE

Price-To-Earnings vs Peers: CSCO is good value based on its Price-To-Earnings Ratio (14.7x) compared to the peer average (30.6x).

Price to Earnings Ratio vs Industry

How does CSCO's PE Ratio compare vs other companies in the US Communications Industry?

Price-To-Earnings vs Industry: CSCO is good value based on its Price-To-Earnings Ratio (14.7x) compared to the US Communications industry average (21.8x)

Price to Earnings Ratio vs Fair Ratio

What is CSCO's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

CSCO PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	14.7x
Fair PE Ratio	23.6x

Price-To-Earnings vs Fair Ratio: CSCO is good value based on its Price-To-Earnings Ratio (14.7x) compared to the estimated Fair Price-To-Earnings Ratio (23.6x).

Share Price vs Fair Value

What is the Fair Price of CSCO when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: CSCO ($42.69) is trading below our estimate of fair value ($101.68)

Significantly Below Fair Value: CSCO is trading below fair value by more than 20%.

Price to Earnings Growth Ratio

PEG Ratio: CSCO is poor value based on its PEG Ratio (2.9x)

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Future Growth

How is Cisco Systems forecast to perform in the next 1 to 3 years based on estimates from 27 analysts?

Future Growth Score

2/6

Future Growth Score 2/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

5.1%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: CSCO's forecast earnings growth (5.1% per year) is above the savings rate (1.9%).

Earnings vs Market: CSCO's earnings (5.1% per year) are forecast to grow slower than the US market (13% per year).

High Growth Earnings: CSCO's earnings are forecast to grow, but not significantly.

Revenue vs Market: CSCO's revenue (4.2% per year) is forecast to grow slower than the US market (7.9% per year).

High Growth Revenue: CSCO's revenue (4.2% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: CSCO's Return on Equity is forecast to be high in 3 years time (30.8%)

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Past Performance

How has Cisco Systems performed over the past 5 years?

Past Performance Score

5/6

Past Performance Score 5/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

16.1%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: CSCO has high quality earnings.

Growing Profit Margin: CSCO's current net profit margins (23.3%) are higher than last year (20.9%).

Past Earnings Growth Analysis

Earnings Trend: CSCO's earnings have grown by 16.1% per year over the past 5 years.

Accelerating Growth: CSCO's earnings growth over the past year (17.5%) exceeds its 5-year average (16.1% per year).

Earnings vs Industry: CSCO earnings growth over the past year (17.5%) underperformed the Communications industry 35.7%.

Return on Equity

High ROE: CSCO's Return on Equity (29.7%) is considered high.

Discover strong past performing companies

Financial Health

How is Cisco Systems's financial position?

Financial Health Score

6/6

Financial Health Score 6/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: CSCO's short term assets ($36.0B) exceed its short term liabilities ($24.2B).

Long Term Liabilities: CSCO's short term assets ($36.0B) exceed its long term liabilities ($28.2B).

Debt to Equity History and Analysis

Debt Level: CSCO has more cash than its total debt.

Reducing Debt: CSCO's debt to equity ratio has reduced from 49.7% to 23.3% over the past 5 years.

Debt Coverage: CSCO's debt is well covered by operating cash flow (149.1%).

Interest Coverage: CSCO earns more interest than it pays, so coverage of interest payments is not a concern.

Balance Sheet

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Dividend

What is Cisco Systems's current dividend yield, its reliability and sustainability?

Dividend Score

5/6

Dividend Score 5/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage

3.56%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: CSCO's dividend (3.56%) is higher than the bottom 25% of dividend payers in the US market (1.61%).

High Dividend: CSCO's dividend (3.56%) is low compared to the top 25% of dividend payers in the US market (4.27%).

Stability and Growth of Payments

Stable Dividend: CSCO's dividends per share have been stable in the past 10 years.

Growing Dividend: CSCO's dividend payments have increased over the past 10 years.

Earnings Payout to Shareholders

Earnings Coverage: With its reasonable payout ratio (52%), CSCO's dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its reasonably low cash payout ratio (46.4%), CSCO's dividend payments are well covered by cash flows.

Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

1.5yrs

Average management tenure

CEO

Chuck Robbins (56 yo)

7yrs

Tenure

US$25,446,695

Compensation

Mr. Charles H. Robbins, also known as Chuck, has been Chief Executive Officer of Cisco Systems, Inc., since July 26, 2015 and has been its Chairman of the Board on December 11, 2017. He has been Director o...

CEO Compensation Analysis

Compensation vs Market: Chuck's total compensation ($USD25.45M) is above average for companies of similar size in the US market ($USD13.41M).

Compensation vs Earnings: Chuck's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: CSCO's management team is not considered experienced ( 1.5 years average tenure), which suggests a new team.

Board Members

Experienced Board: CSCO's board of directors are considered experienced (6.3 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/07/06 00:00
End of Day Share Price	2022/07/06 00:00
Earnings	2022/04/30
Annual Earnings	2021/07/31