CISCO SYSTEMS, INC. (CSCO) Stock Analysis
CISCO SYSTEMS, INC. (CSCO) Stock Analysis
Overall Grade: F (Concerning)
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CISCO SYSTEMS, INC. faces challenges in financial performance that warrant careful analysis.
Key Metrics:
| Metric | Value | Context |
|---|---|---|
| ROIC | 15.2% | Solid returns |
| FCF Margin | 20.7% | Strong cash generation |
| Debt/Equity | 0.6x | Moderate leverage |
Investment Thesis: Strong return on invested capital of 15.2% suggests durable competitive advantages and efficient capital allocation.
What is CISCO SYSTEMS, INC.'s Profitability and ROIC?
CISCO SYSTEMS, INC. generates strong returns on invested capital at 15.2%, indicating efficient capital allocation and competitive advantages. Gross margin of 64.8% with operating margin at 22.7% reflects the company's strong market position.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 15.2% | Good | Strong capital efficiency |
| Return on Equity (ROE) | 23.8% | Excellent | Efficient use of shareholder equity |
| Gross Margin | 64.8% | Excellent | Strong pricing power |
| Operating Margin | 22.7% | Excellent | Efficient operations |
How Strong is CISCO SYSTEMS, INC.'s Cash Flow Quality?
CISCO SYSTEMS, INC. generated $12.2B in free cash flow over the trailing twelve months, representing a 20.7% margin. Cash earnings quality is strong, with operating cash flow exceeding net income by 1.2x.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Free Cash Flow Margin | 20.7% | Excellent | Excellent cash conversion |
| Free Cash Flow (TTM) | $12.2B | Good | Positive cash generation |
| OCF/Net Income | 1.2x | Excellent | High earnings quality |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
What is CISCO SYSTEMS, INC.'s Financial Health?
CISCO SYSTEMS, INC.'s debt-to-equity ratio of 0.6x indicates conservative leverage.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Debt to Equity | 0.6x | Good | Moderate leverage |
| Net Cash Position | $-14.3B | Warning | Net debt position |
Is CISCO SYSTEMS, INC. Stock Overvalued or Undervalued?
CISCO SYSTEMS, INC. trades at a P/E of 26.7x, representing a premium to the sector median of N/A. Free cash flow yield of 4.1% reflects market expectations for growth.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| P/E Ratio | 26.7x | Adequate | Premium valuation |
| EV/Sales | 5.2x | Adequate | Growth premium priced in |
| FCF Yield | 4.1% | Good | Lower cash yield |
| Dividend Yield | 2.2% | Adequate | Growth focus over income |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 15.2% | Top 50% | 2.3x above |
| Free Cash Flow Margin | 20.7% | Top 25% | 2.1x above |
| Gross Margin | 64.8% | Top 50% | 1.2x above |
| Operating Margin | 22.7% | Top 25% | 3.6x above |
| Return on Equity (ROE) | 23.8% | Top 25% | 3.8x above |
| P/E Ratio | 26.7x | N/A | - |
Rating Thresholds
Return on Invested Capital (ROIC)
Measures how efficiently a company uses its debt and equity capital to generate profits. ROIC above 15% typically indicates a competitive moat.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Exceptional capital efficiency, strong competitive moat |
| Good | 12% - 20% | Above-average returns, sustainable competitive position |
| Adequate | 8% - 12% | Around cost of capital, moderate competitive position |
| Warning | 4% - 8% | Below cost of capital, value may be eroding |
| Red flag | < 4% | Significant capital destruction, fundamental issues |
Current: 15.2% (Good - Top 50% of sector (median: 6.5%))
Free Cash Flow Margin
The percentage of revenue converted to free cash flow. Higher margins indicate stronger cash generation and business quality.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Strong cash generation, high-quality business |
| Good | 10% - 20% | Healthy cash conversion |
| Adequate | 5% - 10% | Moderate cash generation |
| Warning | 0% - 5% | Thin cash margins, capital intensive |
| Red flag | < 0% | Cash burn, potential liquidity concerns |
Current: 20.7% (Excellent - Top 25% of sector (median: 10.0%))
Gross Margin
Revenue minus cost of goods sold as a percentage. Higher gross margins indicate pricing power and competitive advantage.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 50% | Strong pricing power and competitive moat |
| Good | 30% - 50% | Healthy margins, differentiated product |
| Adequate | 20% - 30% | Moderate margins, competitive industry |
| Warning | 10% - 20% | Thin margins, commodity-like business |
| Red flag | < 10% | Very thin margins, structural challenges |
Current: 64.8% (Excellent - Top 50% of sector (median: 52.9%))
Debt to Equity Ratio
Total debt divided by shareholders' equity. Lower ratios indicate more conservative financing and reduced financial risk.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 0.3x | Conservative leverage, strong balance sheet |
| Good | 0.3x - 0.7x | Moderate leverage, healthy financial position |
| Adequate | 0.7x - 1.5x | Elevated leverage, monitor closely |
| Warning | 1.5x - 3.0x | High leverage, increased financial risk |
| Red flag | > 3.0x | Excessive leverage, potential distress risk |
Current: 63.0% (Good)
P/E Ratio (Price-to-Earnings)
Stock price divided by earnings per share. Lower P/E may indicate undervaluation, while higher P/E suggests growth expectations.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 15x | Attractively valued, potential opportunity |
| Good | 15x - 25x | Fair value for quality company |
| Adequate | 25x - 35x | Growth premium, justify with earnings growth |
| Warning | 35x - 50x | High expectations priced in |
| Red flag | > 50x or negative | Speculative valuation or losses |
Current: 26.7x (Adequate)
Free Cash Flow Yield
Free cash flow per share divided by stock price. Higher FCF yield indicates better cash return relative to valuation.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 8% | High cash return, potential value opportunity |
| Good | 5% - 8% | Solid cash yield |
| Adequate | 3% - 5% | Moderate cash return |
| Warning | 1% - 3% | Low cash yield, growth expectations |
| Red flag | < 1% | Minimal cash return to shareholders |
Current: 4.1% (Adequate)
Frequently Asked Questions
Q: What is CISCO SYSTEMS, INC.'s Return on Invested Capital (ROIC)?
CISCO SYSTEMS, INC. (CSCO) has a trailing twelve-month Return on Invested Capital (ROIC) of 15.2%. This compares above the sector median of 6.5%. An ROIC between 12-20% indicates solid capital allocation and sustainable competitive position.
Q: What is CISCO SYSTEMS, INC.'s Free Cash Flow Margin?
CISCO SYSTEMS, INC. (CSCO) has a free cash flow margin of 20.7%, generating $12.2 billion in free cash flow over the trailing twelve months. A FCF margin above 20% indicates excellent cash conversion and a high-quality business model.
Q: Is CISCO SYSTEMS, INC. stock overvalued or undervalued?
CISCO SYSTEMS, INC. (CSCO) trades at a P/E ratio of 26.7x, which is above the sector median of N/A. The EV/Sales multiple is 5.2x. Free cash flow yield is 4.1%, which is in line with market averages.
Q: Does CISCO SYSTEMS, INC. pay a dividend?
CISCO SYSTEMS, INC. (CSCO) currently pays a dividend yield of 2.2%. Including share buybacks, the total shareholder yield is 4.3%. This yield is moderate, suggesting a balance between income and growth reinvestment.
Q: How much debt does CISCO SYSTEMS, INC. have?
CISCO SYSTEMS, INC. (CSCO) has a debt-to-equity ratio of 0.6x with total debt of $30.1 billion. Net debt position is $14.3 billion.
Q: What is CISCO SYSTEMS, INC.'s revenue and earnings growth?
CISCO SYSTEMS, INC. (CSCO) grew revenue by 9.0% year-over-year. Earnings per share increased by 21.4% compared to the prior year. Modest growth indicates a mature business with stable demand.
Q: Is CISCO SYSTEMS, INC. buying back stock?
CISCO SYSTEMS, INC. (CSCO) repurchased $6.1 billion of stock over the trailing twelve months. This represents a buyback yield of 2.1%.
Q: How does CISCO SYSTEMS, INC. compare to competitors in Technology?
Compared to other companies in Technology, CISCO SYSTEMS, INC. (CSCO) shows: ROIC of 15.2% is above the sector median of 6.5% (Top 30%). FCF margin of 20.7% exceeds the sector median of 10.0% (Top 25% of sector). Gross margin at 64.8% is 11.9 percentage points higher than sector peers. These rankings are based on MetricDuck's analysis of all Technology companies with available SEC filings.
Q: What warning signs should I watch for with CISCO SYSTEMS, INC.?
CISCO SYSTEMS, INC. (CSCO) shows no major financial warning signs based on current metrics. However, investors should always monitor: 1) Margin compression trends, 2) Cash flow consistency, 3) Debt levels relative to cash generation, and 4) Changes in competitive positioning.
Data Source: Data sourced from 10-Q filed 2025-11-18. TTM metrics as of Q1 2026.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
This analysis is for informational purposes only and does not constitute investment advice.