Cisco (CSCO) continues its recent history of providing some good news to its long beleaguered shareholders. I have been positive on the shares for some time and have owned the shares since they were $17 a share. Its earnings report that came out after the bell Wednesday had an overall positive tone. Although I don't expect the shares to leap at the results, CSCO still provides value and a nice dividend yield. It also provides a low risk position for those investors that believe that the market rally is starting to feel a little long in the tooth.
Positives from earnings report:
- Earnings per share came in at 51 cents a share, beating estimates by 3 cents a share.
- Revenues came in at $12.1B, $50mm better than consensus.
- The CEO, John Chambers, had positive comments about state, federal and local government spending on his interview on CNBC after earnings were released.
- The company bought back some $500mm worth of shares in the quarter with an average price of just over $20 a share.
4 reasons CSCO is still offers solid value at $21 a share:
- The stock yields 2.6% and has more than doubled its payouts over the last two years.
- CSCO is selling near the bottom of its five year valuation range based on P/E, P/CF, P/S and P/B. S&P has a "Buy" rating and a $24 price target on the shares.
- The company has an A+ rated balance sheet and approximately $30B in net cash on its books (more than 25% of its current market capitalization).
- The stock sells for 10x forward earnings (around 7x subtracting cash), a discount to its five year average (12.8).