Yahoo Finance At US$42.58, Is It Time To Put Cisco Systems, Inc. (NASDAQ:CSCO) On Your Watch List?
Today we're going to take a look at the well-established Cisco Systems, Inc. (NASDAQ:CSCO). The company's stock saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$49.37 and falling to the lows of US$41.96. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Cisco Systems' current trading price of US$42.58 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Cisco Systems’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Cisco Systems
What's The Opportunity In Cisco Systems?
Great news for investors – Cisco Systems is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 14.81x is currently well-below the industry average of 23.72x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Cisco Systems’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Cisco Systems generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 17% over the next couple of years, the outlook is positive for Cisco Systems. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? Since CSCO is currently below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on CSCO for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CSCO. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.
Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. Luckily, you can check out what analysts are forecasting by clicking here.
If you are no longer interested in Cisco Systems, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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