InvestorsObserver gives Cisco Systems, Inc. (CSCO) a strong valuation score of 61 from its analysis. The proprietary scoring system considers the underlying health of a company by analyzing its stock price, earnings, and growth rate. CSCO currently holds a better value than 61% of stocks based on these metrics. Long term investors focused on buying-and-holding should find the valuation ranking system most relevant when making investment decisions.
Metrics Analysis
CSCO's trailing-12-month Price to Earnings (PE) ratio of 15.1 puts it around the historical average of roughly 15. CSCO is a average value at its current trading price as investors are paying around what its worth in relation to the company's earnings. CSCO's trailing-12-month earnings per share (EPS) of 2.64 does justify what it is currently trading at in the market. Trailing PE ratios, however, do not factor in a company's projected growth rate, resulting in some firms having high PE ratios due to high growth potentially enticing investors even if current earnings are low.
CSCO currently has a 12-month-forward-PE-to-Growth (PEG) ratio of 2.26. The market is currently overvaluing CSCO in relation to its projected growth due to the PEG ratio being above the fair market value of 1. CSCO's PEG comes from its forward price to earnings ratio being divided by its growth rate. Due to the inclusion of more fundamentals of a company's overall health and a focus on the future rather than the past, PEG ratios are one of the most used valuation metrics by analysts today.
Summary
CSCO's valuation metrics are weak at its current price due to a overvalued PEG ratio due to strong growth. CSCO's PE and PEG are worse than the market average resulting in a below average valuation score.
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