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CSCO supplies Ethernet switching, Internet Protocol (IP) networking gear used for the internet and is the world's largest supplier of high-performance computer internet-working systems. Over the past year Cisco seems to have gotten its act together. And the numbers back this up. With just under half of 2011’s $43.2 billion sales coming from foreign sources, CSCO’s large already-in-use customer base gives it a major advantage over its competitors. At last count, it had only $16.9 billion in total debt while its balance sheet shows cash assets of some $44.4 billion, compared with $39.92 billion at the end of the 1stQ of fiscal 2010. Those cash assets work out to $8.26/share. At a recent price of some $18.25, the “Street” is putting a value on the business of only $10/share. A ridiculously low valuation for this Dow Stock.

A trailing-12-months P/E of 15, and a forward P/E of 12.6 versus its 10-year average P/E of roughly 22, also point to an undervalued issue. The 52-week high of $22.34 was reached on Febraury 7, 2011, while its 52-week low of $13.30 was touched on June 15, 2011. When last I wrote up CSCO on June 28, 2011 it was trading at $15.50 so in roughly 6 months it has appreciated by some 18%, not counting the dividend.

My 2012 earnings estimate (fiscal year ends July 31) for CSCO is $1.45 to $1.55/share. There are about 40 analysts following CSCO and they are predicting for all of 2012, an average of $1.77/share for 2012, which I feel is a tad too high in light of Europe’s fiscal problems.

Also, shares outstanding as of October 29th were 5.375 billion, which is down from the 7.32 billion outstanding in 2001. That folks is a drop of some 26%. Share buy-backs are still ongoing. Over the last 6 months 120 million shares were repurchased. There remains about $10 billion authorized for stock repurchases under the current program with no termination date.

Also of note is the fact that 11 CSCO directors bought over 72,000 shares during December, with only 1 selling 14,000 shares. According to Thomson Reuters who do a great job of tracking such activity, minor sales such as exhibited at CSCO have little meaning. However, when 10 directors buy in mass, it can be construed as a very bullish signal. It should be noted however that “insiders” are usually very early often by 1-2 years. Now that CSCO pays a dividend we can be paid to wait. I also predict another dividend increase in 2012. Too, CSCO now offers a dividend reinvestment plan.

Disclosure:

I am long CSCO.

Source: Year-End Performance Update For Cisco