Cisco: A Solidly Improving Story Continues

Feb.13.13 | About: Cisco Systems, (CSCO)

Cisco (NASDAQ: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:

  1. The stock yields 2.6% and has more than doubled its payouts over the last two years.
  2. 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.
  3. 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).
  4. The stock sells for 10x forward earnings (around 7x subtracting cash), a discount to its five year average (12.8).

Disclosure: I am long CSCO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.