InvestorsObserver gives Cisco Systems, Inc. (CSCO) a strong valuation score of 65 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 65% 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 has a trailing twelve month Price to Earnings (PE) ratio of 15.1 which places it around the histroical average of roughly 15. CSCO is currently trading at a average value due to investors paying around what the stock is worth in relation to its earnings. CSCO's trailing-12-month earnings per share (EPS) of 2.64 does justify its share price in the market. Trailing PE ratios do not factor in the company's projected growth rate, thus, some firms will have high PE ratios caused by high growth recruiting more investors even if the underlying company has produced low earnings so far.
CSCO's 12-month-forward PE to Growth (PEG) ratio of 2.13 is considered a poor value as the market is overvaluing CSCO in relation to the company's projected earnings growth due. CSCO's PEG comes from its forward price to earnings ratio being divided by its growth rate. A PEG ratio of 1 represents a perfect correlation between earnings growth and share price. Due to their incorporation of more fundamentals of a company's overall health and focusing on the future rather than the past, PEG ratios are one of the most used valuation metrics by analysts today.
Summary
CSCO' has a weak valuation at its current share price on account of a overvalued PEG ratio due to strong growth. CSCO's PE and PEG are worse than the market average leading to a below average valuation score.
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