Cisco Systems CSCO
What does Cisco Systems do?
Cisco Systems develops and sells networking technology as well as related software and services. The offering includes switches and routers for enterprise, data center and branch networks, wireless access technology, and solutions for network security, identity and access management, and Secure Access Service Edge. It also includes platforms for observability and network monitoring, as well as collaboration products such as the Webex suite, conferencing devices and contact center software.
Revenue comes from hardware sales, from software under subscription or license models, and from support and maintenance services. Customers are enterprises, telecommunications providers, cloud operators, public sector clients and smaller firms, mostly reached through channel partners. Cisco has long been one of the leading providers in the enterprise networking market and benefits from a large installed base, a broad product range and close integration of components. Competitors include Arista, Juniper (now part of Hewlett Packard Enterprise), Huawei, as well as specialized providers and platform companies in security and collaboration.
Score profile
Rank vs. Communication Equipment (17 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Cisco Systems ranks among the best in the group Communication Equipment (9.0/10). On growth, the company ranks in the middle in the group Communication Equipment (4.6/10). On valuation (higher = cheaper), the stock ranks below average in the group Communication Equipment (4.0/10). On financial strength, Cisco Systems ranks below average in the group Communication Equipment (3.8/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 17.5x | 15.4x | better than 39 % |
| Trailing P/E | 29.5x | 35.7x | better than 54 % |
| PEG ratio | 0.9x | 0.9x | better than 46 % |
| EV/EBITDA | 21.7x | 21.7x | better than 47 % |
| Price/sales | 6.1x | 2.7x | better than 26 % |
| Price/book | 7.7x | 4.3x | better than 26 % |
| Revenue growth | 17.6% | 29.0% | better than 38 % |
| Earnings growth | 52.1% | 50.1% | better than 53 % |
| Gross margin | 64.5% | 48.9% | better than 85 % |
| Operating margin | 27.7% | 12.6% | better than 91 % |
| Net margin | 21.0% | 6.4% | better than 97 % |
| Return on equity | 27.3% | 11.2% | better than 85 % |
| Debt/equity | 62.0% | 76.5% | better than 56 % |
| Current ratio | 0.9x | 1.7x | better than 9 % |
| Free cash flow yield | 2.9% | 2.9% | better than 50 % |
| Dividend yield | 1.7% | 1.2% | – |
| Payout ratio | 49.9% | 38.9% | – |
| Beta | 1.00 | 1.33 | – |
Valuation: what is Cisco Systems worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Cisco Systems a model range of 76.89 USD to 120.31 USD per share.
25 analysts, average rating “Buy”, average price target 135.56 USD (+38.2%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Investment by enterprises, cloud operators and service providers in network and data center infrastructure determines demand for switching and routing products.
- The growing share of recurring revenue from software subscriptions and support stabilizes revenue and earnings.
- Rising requirements for cybersecurity and data traffic increase the need for integrated security and observability solutions.
Risks
- Cyclical IT budgets and customer inventory levels can cause hardware demand to fluctuate significantly at times.
- Specialized competitors and cloud providers increase price and innovation pressure in core markets such as data center networks.
- Supply chains, trade restrictions and geopolitical tensions can weigh on procurement, costs and sales in individual regions.
What to look for with Cisco Systems
The share of recurring revenue in total revenue is informative, as it shows how far the shift from cyclical hardware to predictable software and service models has succeeded.