Is Cisco’s Stock A Good Buy Right Now?

Cisco is up 9.71% while the S&P 500 is down .15%. Year-to-date, Cisco is up 6.95% while the S&P 500 is up 14.43%. Over the past calendar year, Cisco is up 9.37% while the S&P 500 is up 20.94%. When you look at three-year returns, Cisco is down 16.36% while the S&P 500 is up 37.58%.

At $18.83, Cisco is trading close to its 50-day SMA of $18.79. It’s also trading close to its 100-day SMA and 200-day SMA of $18.80 and $18.82, respectively.

E = Earnings And Revenue Have Been Excellent

Who says Cisco isn’t a growth company? Earnings and revenue growth have been impressive over the past five years.

      2008       2009       2010       2011       2012
Revenue ($)in billions

39.45

36.12

40.04

43.22

46.06

Diluted EPS ($)

1.31

1.05

1.33

1.17

1.49

 

Not many companies beat earnings seven quarters in a row. There is also a wide belief that this trend will continue.

     10/2011      1/2012      4/2012      7/2012      10/2012
Revenue ($)in billions

11.26

11.53

11.59

11.69

11.88

Diluted EPS ($)

.33

.40

.40

.36

.39

 

T = Trends Support the Industry

Supposedly, the next big thing is SDN, which stands for Software Defining Network. That’s why Cisco recently spent $1.2 billion on Meraki. If this deal proves to be a success, then Cisco will have a competitive edge in SDN. That could end up paying huge dividends. Since other companies are getting on board with SDN and positioning themselves for the future, Cisco didn’t really have a choice. If Cisco happens to be wrong, it’s still an affordable mistake. Cisco doesn’t have a good acquisition history, but this deal has potential.

Conclusion

We live in a world that relies on networking, and Cisco is the king of networking. That alone is an enormous selling point. Other positives include a 3% yield, a trailing P/E of 12.15, a forward P/E of 9.01, expected revenue growth of 6% in 2013, and 7% revenue growth in 2014.

Don’t let recent subpar performance scare you away. Cisco is an excellent long-term investment. It’s an OUTPERFORM for those with patience.

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