NASDAQ:CSCO
$23.70
(2/9 11:29AM)
+0.9%
| Open | $23.8 |
Mkt Cap | $135.2 Billion |
| High | $23.89 |
52Wk High | $25.10 |
| Low | $23.57 |
52Wk Low | $13.61 |
| Volume | 17.0 Million |
Avg Vol 10D | 69.5 Million |
CSCO Stock Evaluation
As noted in the Recommendation Summary, we are content with maintaining our Fairly Valued rating on CSCO. Although there has been no additional earnings guidance offered by CSCO's management in the last week, the stock price has increased by 5.47%, which is a negative from a value perspective. However, while the price increase does make the stock less attractive, it is only marginally less attractive and not enough to warrant a downgrade. Find more on this and other fundamental factors in our analysis in the paragraphs that follow.
Recommendation Summary
We are reaffirming our rating on CSCO as of this week’s report. While we firmly believe that valuing companies based on fundamentals is very useful, we are careful not to view historical valuations in a vacuum. It is foolish to believe that a stock will always revert to historical norms. So, although there is value in historical norms, they only tell part of the story. When the market or a sector breaks through strategic thresholds such as standard deviations of historical pricing multiples, we find it necessary to view history with a grain of salt as a new reality may be dawning.
In general, when sectors, in this case the Technology sector, have outperformed the market we tend to be a bit more hesitant to recommend stocks in that sector. However, even though the stocks in Technology have appreciated 59.5% in the last twelve months, we believe that CSCO is not quite due for an upgrade. Please see the full report of underlying research for more of our rationale of keeping a rating of Fairly Valued for at least another week.
Looking at the basics, the price of CSCO rose from $22.47 as of 01/30/2010 to a price of $23.70 as of 02/07/2010. This increase does reduce the attractiveness of CSCO, but an increase of 5.47% is not substantial enough to warrant a downgrade at this time.
Also, there have been no meaningful adjustments in earnings expectations to report in the last week.
CSCO Revenue
As a value investing shop, we are interested in seeing how CSCO's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 6.19x and the low end of the range at 3.60x.
With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for CSCO of 3.84x is well below its normal historic Price to Sales levels. At a price of $23.70, CSCO is 22% below where we would expect to see it. Clearly, this stock looks undervalued compared to historical levels, at least on a Price to Sales basis. This will positively affect our analysis because it is rare to find a stock this far below historical norms, and we would expect some price appreciation to bring this metric back towards a more normal range.
CSCO Cash Earnings
As the old saying goes, "Cash is King!" We look at reported Cash Earnings, but the main emphasis of our analysis involves stripping out non-cash events such as depreciation from our cash earnings analysis. This helps us view the cash flows more clearly. Nevertheless, an analysis of Cash Earnings (both reported and otherwise) is absolutely pivotal to assessing a company's value, and currently CSCO is below its historical average multiple of cash earnings as calculated by Ockham. Similar to our analysis of sales per share, Ockham looks at the last 10 years of cash earnings levels for CSCO to identify where the current high and low price levels have been historically in relation to profit per share. Again, we utilize a weighted average methodology which relies more heavily on recent years of data. This weighted average framework provides us with an average high Price to Cash Earnings ratio per share of 25.47 and a 15.36 low over the same period.
At its current price of $23.70, the Price to Cash Earnings ratio of 18.09 per share for CSCO is relatively attractive. At current profitability levels, a drop in share price would only improve our future expectations. Again, Cash Earnings is an incredibly valuable metric, and management at CSCO must continue on its generation to improve our overall outlook for the stock.
CSCO Dividends
A positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. However, we believe dividends provide a useful measure of a company's inherent expectations. As far as our investing methodology goes, it is not necessary to pay a dividend in order to get a favorable rating, so as for right now CSCO gets a neutral rating for the dividend portion of the model. As you can see, we are not receiving historical dividend information from our data provider on CSCO at this time.
A Discussion of CSCO's CEO Occurred on Squawk Box
Keeping up with a CEO is one way that we try to better understand the direction of a company, and there was talk about CSCO management on Squawk Box.
Cisco Systems, Incorporated receives our Fairly Valued rating in our latest report because the current price does not seem out of line with the fundamentals. Crowd sentiment is leaning to the bearish side, according to the robust data set collected by the Motley Fool CAPS survey. We noticed recently that in comparison to all other stocks we analyze in the news; CSCO has received less coverage from the financial media in business television and blogs.
“… I think the big multi nationals, you take a look at what john chambers said about CISCO. It's a stocky own. He was very optimistic back when the dow was 0,000 the first time. …”
CSCO News Mentioned on Mad Money Recently
The latest news from business television and influential blogs is always available through Ockham's RazorWire, and this news is in relation to Cisco Systems, Incorporated.
Cisco Systems, Incorporated receives our Fairly Valued rating in our latest report because the current price does not seem out of line with the fundamentals. Crowd sentiment is leaning to the bearish side, according to the robust data set collected by the Motley Fool CAPS survey. We noticed recently that in comparison to all other stocks we analyze in the news; CSCO has received less coverage from the financial media in business television and blogs.
“… Visa and CISCO, best two numbers last week. Misfortune of coming out of a bad day. Visa is rocking. That's not -- that's not a credit issue. …”
See Who is Talking About News from CSCO on Mad Money
News has broken via the television and viral blogs regarding CSCO, so investors should take an interest in learning what was said.
Cisco Systems, Incorporated receives our Fairly Valued rating in our latest report because the current price does not seem out of line with the fundamentals. We noticed recently that in comparison to all other stocks we analyze in the news; CSCO has received less coverage from the financial media in business television and blogs. Crowd sentiment is leaning to the bearish side, according to the robust data set collected by the Motley Fool CAPS survey.
“… big picture economic problems. Intel from the travel trust as well as CISCO. Any one will do just fine. The socks are back. …”
Mad Money Has News on CSCO
Staying informed on the news is invaluable for investors, and RazorWire has captured a recently discussion on CSCO from Mad Money.
The Ockham valuation currently has a Fairly Valued stance on CSCO because it trades within the price range that we would expect given current market conditions and fundamentals. When taking into account the amount of news coverage each stock normally sees as a percentage of the total, Cisco Systems, Incorporated has actually sunk a bit in comparison to the others. Crowd sentiment is favorable on this stock, as measured by the Motley Fool CAPS survey.
“… In fact, I didn't have the true bull sox case until I sat down, sat down, over a really bad cab nay from australia and poured through the CISCO conference call notes while the sun ... …”
Blue Chips Move the Market: Closing Bell Talks CSCO
As leading economic indicators, blue chip stocks often receive a lot of attention from the media. Recently, Closing Bell talked about CSCO in their discussion of economic bellwethers.
The Motley Fool CAPS data suggests that investors believe Cisco Systems, Incorporated will beat the market in the foreseeable future. As we analyze the results from RazorWire, one thing we do is rank each stock in terms of amount of news coverage. Recently, CSCO has been less covered in the news compared to the rest of our universe of stocks. After factoring in the current fundamentals versus their historically normal ranges, we have established a Fairly Valued stance on CSCO.
“… Nasdaq also understand pressure although certain technology names are doing quite well like CISCO and apple and a number of others. …”
Stay Current on CSCO's News on Closing Bell
As always, the latest news on CSCO is available to Ockham clients through RazorWire, and it was mentioned recently on Closing Bell.
Cisco Systems, Incorporated receives our Fairly Valued rating in our latest report because the current price does not seem out of line with the fundamentals. We noticed recently that in comparison to all other stocks we analyze in the news; CSCO has received less coverage from the financial media in business television and blogs. Crowd sentiment is leaning to the bearish side, according to the robust data set collected by the Motley Fool CAPS survey.
“… CISCO and apple on the upside as well in the drug sector merck is higher. Financials are one pressure but you definitely have positives on the heels of those upgrades as well as ... …”
Squawk On The Street Discussed CSCO in Relation to M&A Activity
News broke today regarding mergers and acquisitions and Cisco Systems, Incorporated was discussed as well on Squawk On The Street. Other sources will be required to know exactly what the context was in the discussion.
Cisco Systems, Incorporated receives our Fairly Valued rating in our latest report because the current price does not seem out of line with the fundamentals. We noticed recently that in comparison to all other stocks we analyze in the news; CSCO has received less coverage from the financial media in business television and blogs. Crowd sentiment is leaning to the bearish side, according to the robust data set collected by the Motley Fool CAPS survey.
“… CISCO SYSTEMS and the company's plans to hire up to 3,000 new workers and that news followed plans a week earlier from oracle to hire a net 1,000 new jobs to help with the ... …”
Fast Money Mentioned Sentiment on Cisco Systems, Incorporated Recently
Fast Money talked about the sentiment surrounding CSCO and the way they are perceived in the marketplace.
When taking into account the amount of news coverage each stock normally sees as a percentage of the total, Cisco Systems, Incorporated has actually sunk a bit in comparison to the others. Crowd sentiment is favorable on this stock, as measured by the Motley Fool CAPS survey. The Ockham valuation currently has a Fairly Valued stance on CSCO because it trades within the price range that we would expect given current market conditions and fundamentals.
“… if you look at a hurricane and guy spoke about a category 4 the other day, wednesday evening after CISCO's earnings you had to feel phenomenal about the market, but thursday ... …”
Cisco Systems, Incorporated Was Talked About by WSJ Marketbeat
The latest news on WSJ Marketbeat in regards to CSCO came through on RazorWire recently.
Cisco Systems, Incorporated receives our Fairly Valued rating in our latest report because the current price does not seem out of line with the fundamentals. We noticed recently that in comparison to all other stocks we analyze in the news; CSCO has received less coverage from the financial media in business television and blogs. Crowd sentiment is leaning to the bearish side, according to the robust data set collected by the Motley Fool CAPS survey.
“… Today’s top contributors to the Dow’s movement and their point contribution: CSCO (4. 38), TRV (4. 16), IBM (3. 93), WMT (3. 63), INTC (3. 48). …”
Closing Bell: An Extremely Hot News Day for Cisco Systems, Incorporated Today
The newswires are burning up right now on Cisco Systems, Incorporated, so check our RazorWire or turn on your TV to see why it is so active in the news.
The Motley Fool CAPS data suggests that investors believe Cisco Systems, Incorporated will beat the market in the foreseeable future. After factoring in the current fundamentals versus their historically normal ranges, we have established a Fairly Valued stance on CSCO. As we analyze the results from RazorWire, one thing we do is rank each stock in terms of amount of news coverage. Recently, CSCO has been less covered in the news compared to the rest of our universe of stocks.
“… S CISCO is up 1. 5% and oracle is up better than 1%. The nasdaq is up about 9%. Most of them are to the downside. The reason why even though you. …”