4-Star Stocks Poised to Pop: Cisco Systems
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, networking giant Cisco Systems (NAS: CSCO) has earned a respected four-star ranking.
With that in mind, let's take a closer look at Cisco's business and see what CAPS investors are saying about the stock right now.
|Headquarters (Founded)||San Jose, Calif. (1984)|
|Market Cap||$84.0 billion|
|Trailing-12-Month Revenue||$43.22 billion|
|Management||Chairman/CEO John Chambers|
CFO Frank Calderoni
|Return on Equity (Average, Past 3 Years)||16.6%|
|Cash/Debt||$44.6 billion / $16.8 billion|
|Competitors||Alcatel-Lucent (NYS: ALU) |
Hewlett-Packard (NYS: HPQ)
Juniper Networks (NYS: JNPR)
Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.
Just last month, cibient tapped Cisco as a tempting turnaround play:
Awesome balance sheet, a small dividend. ... Cisco has had some flops, especially in the consumer divisions, but their bread-and-butter is in the hardware making up the Internet backbone. Last I checked, the Internet is still growing.
Cisco even boasts a robust three-year average operating margin of 20.5%. That's higher than that of main rivals Alcatel-Lucent (1.4%), Hewlett-Packard (9.9%), and Juniper (17.8%).
CAPS All-Star MagicDiligence elaborates on the bull case:
It's true: Flip, Scientific Atlanta, and Linksys were probably mistakes in hindsight. And public sector IT spending (about 20% of Cisco's revenues) will continue to be weak for some time to come. But the market's fears of Cisco losing significant market share in switches to HP and in routers to Juniper (JNPR) have not been realized. In fact, both of those firms are now reporting weak results just like Cisco did 9 months ago. The firm returned to sales growth in Q4 and margins seem to be stabilizing. A renewed focus on areas where the company has sustainable competitive advantages and $1 billion in operating cost cuts should return operating profitability to historical norms near 25%. Cisco has always bought back prolific numbers of shares and now pays a dividend to boot. And it's not like network traffic has flat lined ... the Internet is still experiencing 30-40% year-over-year traffic increases! With the proliferation of "smart" devices, this trend doesn't look to slow down anytime soon.
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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool owns shares of and has created a bull call spread position on Cisco. Motley Fool newsletter services have recommended buying shares of Cisco. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.