Cisco Systems Inc Valuation – April 2019 #CSCO

Company Profile (excerpt from Reuters): Cisco Systems, Inc. (Cisco), incorporated on December 10, 1984, is engaged in designing and selling a range of technologies across networking, security, collaboration, applications and the cloud. The Company operates through three geographic segments: Americas; Europe, Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).The Company’s product and technologies includes, infrastructure platforms; applications; security and other products. It also offers technical support services and advanced services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CSCO – April 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $243,035,961,849 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.80 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 21.55% Fail
6. Moderate PEmg Ratio PEmg < 20 31.37 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.10 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.80 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.67 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.76
MG Growth Estimate 1.20%
MG Value $19.19
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $25.52
MG Value based on 0% Growth $14.96
Market Implied Growth Rate 11.43%
Current Price $55.21
% of Intrinsic Value 287.64%

Cisco Systems, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.63 in 2015 to an estimated $1.76 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.43% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Cisco Systems, Inc. revealed the company was trading above its Graham Number of $24.85. The company pays a dividend of $1.24 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 31.37, which was below the industry average of 69.29, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.9.

Cisco Systems, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.90
Graham Number $24.85
PEmg 31.37
Current Ratio 1.80
PB Ratio 6.10
Current Dividend $1.24
Dividend Yield 2.25%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $53,117,000,000
Total Current Liabilities $29,479,000,000
Long-Term Debt $15,893,000,000
Total Assets $102,462,000,000
Intangible Assets $35,563,000,000
Total Liabilities $61,673,000,000
Shares Outstanding (Diluted Average) 4,505,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.93
Jul2018 $0.02
Jul2017 $1.90
Jul2016 $2.11
Jul2015 $1.75
Jul2014 $1.49
Jul2013 $1.86
Jul2012 $1.49
Jul2011 $1.17
Jul2010 $1.33
Jul2009 $1.05
Jul2008 $1.31
Jul2007 $1.17
Jul2006 $0.89
Jul2005 $0.87
Jul2004 $0.62
Jul2003 $0.50
Jul2002 $0.25
Jul2001 -$0.14
Jul2000 $0.36
Jul1999 $0.29

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.76
Jul2018 $1.27
Jul2017 $1.87
Jul2016 $1.82
Jul2015 $1.63
Jul2014 $1.54
Jul2013 $1.50
Jul2012 $1.30
Jul2011 $1.21
Jul2010 $1.20
Jul2009 $1.11
Jul2008 $1.08
Jul2007 $0.92
Jul2006 $0.74
Jul2005 $0.58
Jul2004 $0.40
Jul2003 $0.27

Recommended Reading:

Other ModernGraham posts about the company

Cisco Systems Inc Valuation – November 2018 $CSCO
Cisco Systems Inc Valuation – February 2018 $CSCO
5 Undervalued Dow Components to Research – March 2017
10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2017
5 Undervalued Dow Components to Research – February 2017

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Cisco Systems Inc Valuation – November 2018 $CSCO

Company Profile (excerpt from Reuters): Cisco Systems, Inc. (Cisco), incorporated on December 10, 1984, is engaged in designing and selling a range of technologies across networking, security, collaboration, applications and the cloud. The Company operates through three geographic segments: Americas; Europe, Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).The Company’s product and technologies includes, infrastructure platforms; applications; security and other products. It also offers technical support services and advanced services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CSCO – November 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $215,355,529,110 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.29 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 20.30% Fail
6. Moderate PEmg Ratio PEmg < 20 27.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.29 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.29 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.58 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.74
MG Growth Estimate 1.05%
MG Value $18.48
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $25.28
MG Value based on 0% Growth $14.82
Market Implied Growth Rate 9.26%
Current Price $47.11
% of Intrinsic Value 254.96%

Cisco Systems, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.63 in 2015 to an estimated $1.74 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.26% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Cisco Systems, Inc. revealed the company was trading above its Graham Number of $24.63. The company pays a dividend of $1.24 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 27.02, which was below the industry average of 57.15, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.77.

Cisco Systems, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.77
Graham Number $24.63
PEmg 27.02
Current Ratio 2.29
PB Ratio 5.29
Current Dividend $1.24
Dividend Yield 2.63%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 7/1/2018
Total Current Assets $61,837,000,000
Total Current Liabilities $27,035,000,000
Long-Term Debt $20,331,000,000
Total Assets $108,784,000,000
Intangible Assets $34,258,000,000
Total Liabilities $65,580,000,000
Shares Outstanding (Diluted Average) 4,848,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.88
Jul2018 $0.02
Jul2017 $1.90
Jul2016 $2.11
Jul2015 $1.75
Jul2014 $1.49
Jul2013 $1.86
Jul2012 $1.49
Jul2011 $1.17
Jul2010 $1.33
Jul2009 $1.05
Jul2008 $1.31
Jul2007 $1.17
Jul2006 $0.89
Jul2005 $0.87
Jul2004 $0.62
Jul2003 $0.50
Jul2002 $0.25
Jul2001 -$0.14
Jul2000 $0.36
Jul1999 $0.29

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.74
Jul2018 $1.27
Jul2017 $1.87
Jul2016 $1.82
Jul2015 $1.63
Jul2014 $1.54
Jul2013 $1.50
Jul2012 $1.30
Jul2011 $1.21
Jul2010 $1.20
Jul2009 $1.11
Jul2008 $1.08
Jul2007 $0.92
Jul2006 $0.74
Jul2005 $0.58
Jul2004 $0.40
Jul2003 $0.27

Recommended Reading:

Other ModernGraham posts about the company

Cisco Systems Inc Valuation – February 2018 $CSCO
5 Undervalued Dow Components to Research – March 2017
10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2017
5 Undervalued Dow Components to Research – February 2017
15 Best Stocks for Value Investors This Week – 1/14/17

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ACI Worldwide Inc Valuation – July 2018 $ACIW
Akamai Technologies Inc Valuation – May 2018 $AKAM
Symantec Corp Valuation – April 2018 $SYMC
Intuit Inc Valuation – April 2018 $INTU
CommVault Systems Inc Valuation – April 2018 $CVLT
Constellation Software Inc Valuation – April 2018 $TSE-CSU

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Cisco Systems Inc Valuation – February 2018 $CSCO

Company Profile (obtained from Marketwatch): Cisco Systems, Inc. designs, manufactures and sells Internet Protocol based networking products and services related to the communications and information technology industry. Its product offerings comprises of the following categories: Switches, Routers, Wireless, Network Management Interfaces and Modules, Optical Networking, Access Points, Outdoor and Industrial Access Points, Next-Generation Firewalls, Advanced Malware Protection, VPN Security Clients, Email and Web Security. The company was founded by Sandra Lerner and Leonard Bosack on December 10, 1984 and is headquartered in San Jose, CA.

CSCO Chart

CSCO data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CSCO – February 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $217,519,338,608 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.43 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 84.23% Pass
6. Moderate PEmg Ratio PEmg < 20 20.91 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.17 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.43 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.51 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.10
MG Growth Estimate 5.56%
MG Value $41.30
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $30.52
MG Value based on 0% Growth $17.89
Market Implied Growth Rate 6.20%
Current Price $44.00
% of Intrinsic Value 106.53%

Cisco Systems, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.54 in 2014 to an estimated $2.1 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.2% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Cisco Systems, Inc. revealed the company was trading above its Graham Number of $27.49. The company pays a dividend of $1.1 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.91, which was below the industry average of 38.79, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.32.

Cisco Systems, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $1.32
Graham Number $27.49
PEmg 20.91
Current Ratio 2.43
PB Ratio 4.17
Current Dividend $1.10
Dividend Yield 2.50%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2018
Total Current Assets $86,050,000,000
Total Current Liabilities $35,364,000,000
Long-Term Debt $25,625,000,000
Total Assets $131,510,000,000
Intangible Assets $32,865,000,000
Total Liabilities $79,528,000,000
Shares Outstanding (Diluted Average) 4,924,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.53
Jul2017 $1.90
Jul2016 $2.11
Jul2015 $1.75
Jul2014 $1.49
Jul2013 $1.86
Jul2012 $1.49
Jul2011 $1.17
Jul2010 $1.33
Jul2009 $1.05
Jul2008 $1.31
Jul2007 $1.17
Jul2006 $0.89
Jul2005 $0.87
Jul2004 $0.62
Jul2003 $0.50
Jul2002 $0.25
Jul2001 -$0.14
Jul2000 $0.36
Jul1999 $0.29
Jul1998 $0.20

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.10
Jul2017 $1.87
Jul2016 $1.82
Jul2015 $1.63
Jul2014 $1.54
Jul2013 $1.50
Jul2012 $1.30
Jul2011 $1.21
Jul2010 $1.20
Jul2009 $1.11
Jul2008 $1.08
Jul2007 $0.92
Jul2006 $0.74
Jul2005 $0.58
Jul2004 $0.40
Jul2003 $0.27
Jul2002 $0.17

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – February 2016
26 Best Stocks For Value Investors This Week – 2/6/16
Cisco Systems Inc Valuation – February 2016 $CSCO
10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2016
10 Undervalued Companies for the Defensive Dividend Stock Investor – December 2015

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Symantec Corp Valuation – August 2017 $SYMC
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Adobe Systems Inc Valuation – February 2017 $ADBE
Synopsys Inc Valuation – Initial Coverage $SNPS
Microsoft Corporation Valuation – February 2017 $MSFT
Cisco Systems Inc Valuation – January 2017 $CSCO
Autodesk Inc Valuation – December 2016 $ADSK

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Cisco Systems Inc Valuation – January 2017 $CSCO

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Cisco Systems Inc (CSCO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cisco Systems, Inc. designs and sells a range of products, provides services and delivers integrated solutions to develop and connect networks around the world. The Company operates through three geographic segments: Americas; Europe, the Middle East and Africa (EMEA), and Asia Pacific, Japan and China (APJC). The Company groups its products and technologies into various categories, such as Switching; Next-Generation Network (NGN) Routing; Collaboration; Data Center; Wireless; Service Provider Video; Security, and Other Products. In addition to its product offerings, the Company provides a range of service offerings, including technical support services and advanced services. The Company delivers its technology and services to its customers as solutions for their priorities, including cloud, video, mobility, security, collaboration and analytics. The Company serves customers, including businesses of all sizes, public institutions, governments and service providers.

CSCO Chart

CSCO data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CSCO – January 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $152,248,014,127 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.58 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 66.94% Pass
6. Moderate PEmg Ratio PEmg < 20 15.17 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.43 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.58 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.51 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.00
MG Growth Estimate 5.04%
MG Value $37.19
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $29.03
MG Value based on 0% Growth $17.02
Market Implied Growth Rate 3.34%
Current Price $30.38
% of Intrinsic Value 81.69%

Cisco Systems, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.5 in 2013 to an estimated $2 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 3.34% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Cisco Systems, Inc. revealed the company was trading above its Graham Number of $25.55. The company pays a dividend of $0.99 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 15.17, which was below the industry average of 38.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $4.

Cisco Systems, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $4.00
Graham Number $25.55
PEmg 15.17
Current Ratio 3.58
PB Ratio 2.43
Current Dividend $0.99
Dividend Yield 3.26%
Number of Consecutive Years of Dividend Growth 7

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2016
Total Current Assets $83,141,000,000
Total Current Liabilities $23,217,000,000
Long-Term Debt $30,634,000,000
Total Assets $126,287,000,000
Intangible Assets $29,120,000,000
Total Liabilities $62,881,000,000
Shares Outstanding (Diluted Average) 5,066,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.30
Jul2016 $2.11
Jul2015 $1.75
Jul2014 $1.49
Jul2013 $1.86
Jul2012 $1.49
Jul2011 $1.17
Jul2010 $1.33
Jul2009 $1.05
Jul2008 $1.31
Jul2007 $1.17
Jul2006 $0.89
Jul2005 $0.87
Jul2004 $0.62
Jul2003 $0.50
Jul2002 $0.25
Jul2001 -$0.14
Jul2000 $0.36
Jul1999 $0.29
Jul1998 $0.20
Jul1997 $0.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.00
Jul2016 $1.82
Jul2015 $1.63
Jul2014 $1.54
Jul2013 $1.50
Jul2012 $1.30
Jul2011 $1.21
Jul2010 $1.20
Jul2009 $1.11
Jul2008 $1.08
Jul2007 $0.92
Jul2006 $0.74
Jul2005 $0.58
Jul2004 $0.40
Jul2003 $0.27
Jul2002 $0.17
Jul2001 $0.15

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – February 2016
26 Best Stocks For Value Investors This Week – 2/6/16
Cisco Systems Inc Valuation – February 2016 $CSCO
10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2016
10 Undervalued Companies for the Defensive Dividend Stock Investor – December 2015

Other ModernGraham posts about related companies

Symantec Corporation Valuation – August 2016 $SYMC
Adobe Systems Inc Valuation – August 2016 $ADBE
Microsoft Corporation Valuation – August 2016 $MSFT
Cisco Systems Inc Valuation – August 2016 $CSCO
Oracle Corporation Valuation – July 2016 $ORCL
CA Inc Valuation – July 2016 $CA
Red Hat Inc Valuation – June 2016 $RHT
Yahoo! Inc Valuation – June 2016 $YHOO
Alphabet Inc Valuation – June 2016 $GOOGL
Ansys Inc Valuation – June 2016 $ANSS

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Cisco Systems Inc Valuation – August 2016 $CSCO

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Cisco Systems Inc (CSCO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cisco System, Inc. (Cisco) designs and sells lines of products, provides services and delivers integrated solutions to develop and connect networks around the world, building the Internet. The Company is engaged in designing, manufacturing and selling Internet Protocol (IP)-based networking and other products related to the communications and information technology (IT) industry, and provides services associated with these products and their use. The Company operates its business through three segments: The Americas; Europe, Middle East, and Africa (EMEA), and Asia Pacific, Japan, and China (APJC). It groups its products and technologies into the various categories, such as Switching, Next-Generation Network (NGN) Routing, Collaboration, Service Provider Video, Data Center, Wireless, Security, and Other Products. In addition to its product offerings, it provides a range of service offerings, including technical support services and advanced services.

CSCO Chart

CSCO data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CSCO – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $154,865,867,347 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.27 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 52.41% Pass
6. Moderate PEmg Ratio PEmg < 20 16.91 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.51 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.27 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.45 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

CSCO value chart August 2016

EPSmg $1.83
MG Growth Estimate 6.03%
MG Value $37.53
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $26.47
MG Value based on 0% Growth $15.52
Market Implied Growth Rate 4.21%
Current Price $30.87
% of Intrinsic Value 82.26%

Cisco Systems, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.3 in 2012 to an estimated $1.83 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 4.21% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Cisco Systems, Inc. revealed the company was trading above its Graham Number of $24.42. The company pays a dividend of $0.89 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.91, which was below the industry average of 36.31, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $4.4.

Cisco Systems, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

CSCO charts August 2016

Net Current Asset Value (NCAV) $4.40
Graham Number $24.42
PEmg 16.91
Current Ratio 3.27
PB Ratio 2.51
Current Dividend $0.89
Dividend Yield 2.88%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 4/1/2016
Total Current Assets $78,571,000,000
Total Current Liabilities $24,003,000,000
Long-Term Debt $24,431,000,000
Total Assets $118,654,000,000
Intangible Assets $29,506,000,000
Total Liabilities $56,296,000,000
Shares Outstanding (Diluted Average) 5,065,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.14
Jul2015 $1.75
Jul2014 $1.49
Jul2013 $1.86
Jul2012 $1.49
Jul2011 $1.17
Jul2010 $1.33
Jul2009 $1.05
Jul2008 $1.31
Jul2007 $1.17
Jul2006 $0.89
Jul2005 $0.87
Jul2004 $0.62
Jul2003 $0.50
Jul2002 $0.25
Jul2001 -$0.14
Jul2000 $0.36
Jul1999 $0.29
Jul1998 $0.20
Jul1997 $0.17
Jul1996 $0.16

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.83
Jul2015 $1.63
Jul2014 $1.54
Jul2013 $1.50
Jul2012 $1.30
Jul2011 $1.21
Jul2010 $1.20
Jul2009 $1.11
Jul2008 $1.08
Jul2007 $0.92
Jul2006 $0.74
Jul2005 $0.58
Jul2004 $0.40
Jul2003 $0.27
Jul2002 $0.17
Jul2001 $0.15
Jul2000 $0.27

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – February 2016
26 Best Stocks For Value Investors This Week – 2/6/16
Cisco Systems Inc Valuation – February 2016 $CSCO
10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2016
10 Undervalued Companies for the Defensive Dividend Stock Investor – December 2015

Other ModernGraham posts about related companies

Oracle Corporation Valuation – July 2016 $ORCL
CA Inc Valuation – July 2016 $CA
Red Hat Inc Valuation – June 2016 $RHT
Yahoo! Inc Valuation – June 2016 $YHOO
Alphabet Inc Valuation – June 2016 $GOOGL
Ansys Inc Valuation – June 2016 $ANSS
Citrix Systems Inc Valuation – May 2016 $CTXS
Symantec Corp Valuation – February 2016 $SYMC
Microsoft Corp Valuation – February 2016 $MSFT
Cisco Systems Inc Valuation – February 2016 $CSCO

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Cisco Systems Inc Valuation – February 2016 $CSCO

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Cisco Systems Inc (CSCO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cisco System, Inc. (Cisco) designs and sells lines of products, provides services and delivers integrated solutions to develop and connect networks around the world, building the Internet. The Company is engaged in designing, manufacturing and selling Internet Protocol (IP)-based networking and other products related to the communications and information technology (IT) industry, and provides services associated with these products and their use. The Company operates its business through three segments: The Americas; Europe, Middle East, and Africa (EMEA), and Asia Pacific, Japan, and China (APJC). It groups its products and technologies into the various categories, such as Switching, Next-Generation Network (NGN) Routing, Collaboration, Service Provider Video, Data Center, Wireless, Security, and Other Products. In addition to its product offerings, it provides a range of service offerings, including technical support services and advanced services.

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of CSCO

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $117,257,399,996 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.35 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 49.01% Pass
6. Moderate PEmg Ratio PEmg < 20 13.19 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.01 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.35 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.42 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

CSCO value chart February 2016

EPSmg $1.79
MG Growth Estimate 5.57%
MG Value $35.06
Opinion Undervalued
MG Value based on 3% Growth $25.89
MG Value based on 0% Growth $15.18
Market Implied Growth Rate 2.34%
Current Price $23.54
% of Intrinsic Value 67.15%

Cisco Systems Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only initially concerned by the short dividend record while the Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.30 in 2012 to an estimated $1.79 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.34% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Stage 3: Information for Further Research

CSCO charts February 2016

Net Current Asset Value (NCAV) $4.33
Graham Number $23.16
PEmg 13.19
Current Ratio 3.35
PB Ratio 2.01
Dividend Yield 3.48%
Number of Consecutive Years of Dividend Growth 6

 

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Oct2015
Total Current Assets $73,946,000,000
Total Current Liabilities $22,100,000,000
Long-Term Debt $21,594,000,000
Total Assets $111,773,000,000
Intangible Assets $27,174,000,000
Total Liabilities $51,796,000,000
Shares Outstanding (Diluted Average) 5,113,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.02
Jul2015 $1.75
Jul2014 $1.49
Jul2013 $1.86
Jul2012 $1.49
Jul2011 $1.17
Jul2010 $1.33
Jul2009 $1.05
Jul2008 $1.31
Jul2007 $1.17
Jul2006 $0.89
Jul2005 $0.87
Jul2004 $0.62
Jul2003 $0.50
Jul2002 $0.25
Jul2001 -$0.14
Jul2000 $0.36
Jul1999 $0.29
Jul1998 $0.20
Jul1997 $0.17
Jul1996 $0.16

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.79
Jul2015 $1.63
Jul2014 $1.54
Jul2013 $1.50
Jul2012 $1.30
Jul2011 $1.21
Jul2010 $1.20
Jul2009 $1.11
Jul2008 $1.08
Jul2007 $0.92
Jul2006 $0.74
Jul2005 $0.58
Jul2004 $0.40
Jul2003 $0.27
Jul2002 $0.17
Jul2001 $0.15
Jul2000 $0.27

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2016
Cisco Systems Inc. Valuation – November 2015 Update $CSCO
The Best Companies of the Software Industry – August 2015
The 8 Best Stocks For Value Investors This Week – 8/8/15
Cisco Systems Inc. Analysis – August 2015 Update $CSCO

Other ModernGraham posts about related companies

CA Inc Valuation – January 2016 Update $CA
Intuit Inc Valuation – January 2016 Update $INTU
Oracle Corporation Valuation – January 2016 Update $ORCL
Ansys Inc. Valuation – November 2015 Update $ANSS
Yahoo! Inc. Valuation – November 2015 Update $YHOO
Microsoft Corporation Valuation – November 2015 Update $MSFT
Cisco Systems Inc. Valuation – November 2015 Update $CSCO
Alphabet Inc. Valuation – October 2015 Update $GOOG $GOOGL
Intuit Inc. Analysis – October 2015 Update $INTU
Oracle Corporation Analysis – October 2015 Update $ORCL

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Cisco Systems Inc. Valuation – November 2015 Update $CSCO

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – October 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Cisco Systems Inc. (CSCO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cisco System, Inc. (Cisco) designs and sells lines of products, provides services and delivers integrated solutions to develop and connect networks around the world, building the Internet. The Company is engaged in designing, manufacturing and selling Internet Protocol (IP)-based networking and other products related to the communications and information technology (IT) industry, and provides services associated with these products and their use. The Company operates its business through three segments: The Americas; Europe, Middle East, and Africa (EMEA), and Asia Pacific, Japan, and China (APJC). It groups its products and technologies into the various categories, such as Switching, Next-Generation Network (NGN) Routing, Collaboration, Service Provider Video, Data Center, Wireless, Security, and Other Products. In addition to its product offerings, it provides a range of service offerings, including technical support services and advanced services.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of CSCO – November 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $144,454,083,735 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.23 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 52.97% Pass
6. Moderate PEmg Ratio PEmg < 20 15.49 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.44 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.23 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.41 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

CSCO value Chart November 2015

EPSmg $1.83
MG Growth Estimate 6.11%
MG Value $37.94
Opinion Undervalued
MG Value based on 3% Growth $26.56
MG Value based on 0% Growth $15.57
Market Implied Growth Rate 3.50%
Current Price $28.38
% of Intrinsic Value 74.79%

Cisco Systems Inc. qualifies for boththe Enterprising Investor and the more conservative Defensive Investor.  The Defensive Investor is only concerned with the short dividend record.  The Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.30 in 2011 to an estimated $1.83 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.5% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Cisco Systems Inc. (CSCO)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

CSCO Charts November 2015

Net Current Asset Value (NCAV) $4.39
Graham Number $23.89
PEmg 15.49
Current Ratio 3.23
PB Ratio 2.44
Dividend Yield 2.82%
Number of Consecutive Years of Dividend Growth 6

 

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $76,283,000,000
Total Current Liabilities $23,623,000,000
Long-Term Debt $21,457,000,000
Total Assets $113,481,000,000
Intangible Assets $26,845,000,000
Total Liabilities $53,783,000,000
Shares Outstanding (Diluted Average) 5,131,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.16
Jul15 $1.75
Jul14 $1.49
Jul13 $1.86
Jul12 $1.49
Jul11 $1.17
Jul10 $1.33
Jul09 $1.05
Jul08 $1.31
Jul07 $1.17
Jul06 $0.89
Jul05 $0.87
Jul04 $0.62
Jul03 $0.50
Jul02 $0.25
Jul01 -$0.14
Jul00 $0.36
Jul99 $0.29
Jul98 $0.20
Jul97 $0.17
Jul96 $0.16

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.83
Jul15 $1.63
Jul14 $1.54
Jul13 $1.50
Jul12 $1.30
Jul11 $1.21
Jul10 $1.20
Jul09 $1.11
Jul08 $1.08
Jul07 $0.92
Jul06 $0.74
Jul05 $0.58
Jul04 $0.40
Jul03 $0.27
Jul02 $0.17
Jul01 $0.15
Jul00 $0.27

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Software Industry – August 2015
The 8 Best Stocks For Value Investors This Week – 8/8/15
Cisco Systems Inc. Analysis – August 2015 Update $CSCO
47 Companies in the Spotlight This Week – 5/16/15
Cisco Systems Inc. Quarterly Valuation – May 2015 $CSCO

Other ModernGraham posts about related companies

Alphabet Inc. Valuation – October 2015 Update $GOOG $GOOGL
Intuit Inc. Analysis – October 2015 Update $INTU
Oracle Corporation Analysis – October 2015 Update $ORCL
CA Inc. Analysis – August 2015 Update $CA
The Best Companies of the Software Industry – August 2015
Ansys Inc. Analysis – Initial Coverage $ANSS
Yahoo! Inc. Analysis – August 2015 Update $YHOO
Autodesk Inc. Analysis – August 2015 Update $ADSK
Microsoft Corporation Analysis – August 2015 Update $MSFT
Cisco Systems Inc. Analysis – August 2015 Update $CSCO

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Cisco Systems Inc. Analysis – August 2015 Update $CSCO

500px-Cisco_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – July 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Cisco Systems Inc. (CSCO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cisco System, Inc. (Cisco) designs, manufactures, and sells Internet protocol (IP)-based networking products and services related to the communications and information technology (IT) industry. The Company also provides services associated with these products and their use and also provides products and services for transporting data, voice, and video traffic across intranets, extranets, and the Internet. The Company’s business operates in three segments: the Americas; Europe, Middle East, and Africa (EMEA), and Asia Pacific, Japan, and China (APJC). The Company groups its products and technologies into the following categories: Switching, Next-Generation Network (NGN) Routing, Service Provider Video, Collaboration, Data Center, Wireless, Security, and Other Products. These products, primarily integrated by Cisco IOS Software, link geographically dispersed local-area networks (LANs), metropolitan-area networks (MANs), and wide-area networks (WANs).

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Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $28.27
MG Value $32.54
MG Opinion Fairly Valued
Value Based on 3% Growth $24.01
Value Based on 0% Growth $14.08
Market Implied Growth Rate 4.29%
Net Current Asset Value (NCAV) $4.26
PEmg 17.07
Current Ratio 2.98
PB Ratio 2.47

Balance Sheet – April 2015

Current Assets $69,331,000,000
Current Liabilities $23,245,000,000
Total Debt $16,586,000,000
Total Assets $106,212,000,000
Intangible Assets $27,024,000,000
Total Liabilities $47,389,000,000
Outstanding Shares 5,148,000,000

Earnings Per Share

2015 (estimate) $1.83
2014 $1.49
2013 $1.86
2012 $1.49
2011 $1.17
2010 $1.33
2009 $1.05
2008 $1.31
2007 $1.17
2006 $0.89
2005 $0.87

Earnings Per Share – ModernGraham

2015 (estimate) $1.66
2014 $1.54
2013 $1.50
2012 $1.30
2011 $1.21
2010 $1.20

Dividend History

Free Cash Flow

Conclusion:

Cisco Systems Inc. qualifies for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor is only initially concerned with the short dividend record.  The Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.21 in 2011 to an estimated $1.66 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 4.29% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Cisco Systems Inc. (CSCO)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

[/level-mg-stocks-screens-subscriber]

Cisco Systems Inc. Quarterly Valuation – May 2015 $CSCO

500px-Cisco_logo.svgCisco Systems Inc. (NASDAQ:CSCO) may attract some potential investors, as the company has significantly trailed the market in recent years. Benjamin Graham, the father of value investing, taught that looking at the price cannot be the sole factor in investment decisions, as the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits. Here is a look at how the company fares in the ModernGraham valuation model.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using theModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

CSCO Chart

CSCO data by YCharts

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To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.
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Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 6/7

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – PASS
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – Has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – Earnings per share has increased by at least 1/3rd over the last 10 years using 3-year averages at the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) Ratio – PEmg is less than 20 – PASS
  7. Moderate Price-to-Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – Must pass at least 4 of the following 5 tests or be suitable for a Defensive Investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – Current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt-to-Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  4. Dividend Record – Currently pays a dividend – PASS
  5. Earnings Growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $29.17
MG Value $32.94
MG Opinion Fairly Valued
Value Based on 3% Growth $24.11
Value Based on 0% Growth $14.13
Market Implied Growth Rate 4.52%
Net Current Asset Value (NCAV) $4.01
PEmg 17.54
Current Ratio 3.39
PB Ratio 2.61

Balance Sheet – January 2015

Current Assets $67,882,000,000
Current Liabilities $20,034,000,000
Total Debt $19,667,000,000
Total Assets $104,922,000,000
Intangible Assets $27,137,000,000
Total Liabilities $47,204,000,000
Outstanding Shares 5,160,000,000

Earnings Per Share

2015 (estimate) $1.85
2014 $1.49
2013 $1.86
2012 $1.49
2011 $1.17
2010 $1.33
2009 $1.05
2008 $1.31
2007 $1.17
2006 $0.89
2005 $0.87

Earnings Per Share – ModernGraham

2015 (estimate) $1.66
2014 $1.54
2013 $1.50
2012 $1.30
2011 $1.21
2010 $1.20

Dividend History

CSCO Dividend Chart

CSCO Dividend data by YCharts

Conclusion

Cisco Systems Inc. passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The Defensive Investor’s only initial concern is the short dividend history, and the Enterprising Investor has no initial concerns. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has seen its EPSmg (normalized earnings) grow from $1.21 in 2011 to an estimated $1.66 for 2015. This is a strong level of growth and supports the market’s implied estimate for earnings growth of 4.52% annual growth over the next 7-10 years. The ModernGraham valuation model returns an estimate of intrinsic value falling within a margin of safety relative to the current price, indicating the company is fairly valued at the present time.

Disclaimer: The author did not hold a position in any of the companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours. Logos taken from either the company website or Wikipedia; this article is not affiliated with the companies in any manner.

[/level-mg-stocks-screens-subscriber]

Cisco Systems Inc. Quarterly Valuation – February 2015 $CSCO

500px-Cisco_logo.svg

Cisco Systems Inc. passes the initial requirements of both the Defensive Investor and the Enterprising Investor. The only issue the Defensive Investor has with the company is the short dividend history, while the Enterprising Investor has no initial concerns. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $1.21 in 2011 to an estimated $1.73 for 2015. This level of demonstrated growth is well above the market’s implied estimate for earnings growth of only 3.61% over the next 7-10 years. In fact, the historical growth is around 8.59% per year, so the market is expecting a significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, and therefore returns an estimate of intrinsic value falling above the current price, indicating the company is undervalued at the present time.

Be sure to check out previous ModernGraham valuations of Cisco Systems Inc. (CSCO) for greater perspective!

Read the full valuation on Seeking Alpha!

CSCO Chart

CSCO data by YCharts

Disclaimer:  The author did not hold a position in Cisco Systems Inc. (CSCO) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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