Cisco in 2013: A Deep Value Play

In the following video, senior technology analyst Eric Bleeker looks at Cisco's valuation. As Eric notes, a key reason investors look at Cisco is that it's cheap, trading at roughly 12 times earnings.

Yet the entire technology space is rife with companies in deep-value territory. Dell was bought out for around 10 times earnings, while Hewlett-Packard has recently traded below four times its trailing free cash flow -- a stunningly cheap multiple.

Looking out even further, we can see Intel and Apple in the broader technology sphere trading at around 10 times earnings. That is to say, when looking at valuation, a company must always be compared against its industry peers, and Cisco's peers are cheap as well.

Yet IBM has recently fetched a higher multiple than other big tech plays. Eric believes that the breadth of IBM's portfolio gives investors a feeling of more certainty in a tech landscape that looks quite uncertain in the next five years.

Looking at Cisco, Eric notes that if the company is able to continue growing its services business at rates beyond the company average, it could give Cisco a similar storyline of added safety though multiple revenue streams and finally nudge its multiple forward. To see Eric's full thoughts, watch the video.

Once a high-flying tech darling, Cisco is now on the radar of value-oriented dividend lovers. Get the lowdown on the routing juggernaut in The Motley Fool's premium report. Our report also has you covered with a full year of free analyst updates to keep you informed as its story changes, so click here now to read more.

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Eric Bleeker, CFA, owns shares of Cisco Systems. The Motley Fool recommends Apple, Cisco Systems, and Intel and owns shares of Apple, Intel, and IBM. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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