Cisco Systems (CSCO) reports earnings on Wednesday. Expectations are for 47 cents a share in EPS on just under $11.6B in revenues. The company seems undervalued and should hold up better than the overall market if we hit increased valuation due to their rock solid balance sheet, low valuation, dividend yield and robust cash flow.
7 reasons CSCO is a solid value at $19 a share:
- It has a fortress balance sheet with approximately $30B in net cash (30% of market capitalization).
- The company almost always beats earnings expectations. It has beat quarterly earnings estimates for at least 12 quarters in a row, and the average beat over consensus have averaged 9% over the last four quarters.
- The stock is going for less than 10 times forward earnings, a discount to its five year average (14.3). If you strip out net cash, Cisco is selling at around 7 times forward earnings.
- Consensus estimates have risen for FY2012 and FY2013 over the last three months.
- The company is showing steady revenue growth. Analysts expect sales growth of 6% to 8% for both FY2012 and FY2013. It has averaged just over 7% revenue growth annually over the past five years.
- The stock sells for around 9 times operating cash flow, pays a dividend of 1.7% and has a reasonable five year projected PEG (1.22) for a mature, but growing tech titan.
- The stock is selling near the bottom of its five year valuation range based on P/E, P/S and P/CF.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CSCO over the next 72 hours.
