Intrinsic value of Cisco Systems, Inc. - CSCO

Previous Close

$57.03

  Intrinsic Value

$38.25

stock screener

  Rating & Target

sell

-33%

Previous close

$57.03

 
Intrinsic value

$38.25

 
Up/down potential

-33%

 
Rating

sell

We calculate the intrinsic value of CSCO stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 251.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
Revenue, $m
  51,649
  54,091
  56,665
  59,374
  62,226
  65,227
  68,384
  71,705
  75,198
  78,870
  82,731
  86,790
  91,056
  95,539
  100,251
  105,201
  110,403
  115,868
  121,609
  127,640
  133,976
  140,631
  147,621
  154,962
  162,673
  170,772
  179,278
  188,210
  197,591
  207,443
Variable operating expenses, $m
  38,516
  40,323
  42,227
  44,232
  46,342
  48,562
  50,898
  53,356
  55,940
  58,657
  61,213
  64,217
  67,373
  70,690
  74,176
  77,839
  81,688
  85,731
  89,979
  94,442
  99,130
  104,054
  109,225
  114,658
  120,363
  126,355
  132,649
  139,258
  146,199
  153,488
Fixed operating expenses, $m
  208
  213
  218
  223
  227
  232
  238
  243
  248
  254
  259
  265
  271
  277
  283
  289
  295
  302
  308
  315
  322
  329
  337
  344
  351
  359
  367
  375
  383
  392
Total operating expenses, $m
  38,724
  40,536
  42,445
  44,455
  46,569
  48,794
  51,136
  53,599
  56,188
  58,911
  61,472
  64,482
  67,644
  70,967
  74,459
  78,128
  81,983
  86,033
  90,287
  94,757
  99,452
  104,383
  109,562
  115,002
  120,714
  126,714
  133,016
  139,633
  146,582
  153,880
Operating income, $m
  12,924
  13,555
  14,220
  14,920
  15,656
  16,432
  17,248
  18,107
  19,010
  19,959
  21,259
  22,309
  23,412
  24,573
  25,792
  27,073
  28,420
  29,835
  31,321
  32,883
  34,524
  36,248
  38,059
  39,961
  41,959
  44,058
  46,262
  48,577
  51,009
  53,563
EBITDA, $m
  14,473
  15,162
  15,889
  16,655
  17,460
  18,308
  19,201
  20,139
  21,127
  22,165
  23,257
  24,405
  25,612
  26,880
  28,214
  29,615
  31,087
  32,634
  34,259
  35,967
  37,760
  39,645
  41,625
  43,704
  45,888
  48,183
  50,593
  53,124
  55,782
  58,574
Interest expense (income), $m
  897
  1,381
  1,534
  1,695
  1,865
  2,044
  2,232
  2,431
  2,639
  2,858
  3,089
  3,332
  3,587
  3,855
  4,137
  4,433
  4,744
  5,071
  5,415
  5,775
  6,155
  6,553
  6,972
  7,411
  7,873
  8,358
  8,867
  9,402
  9,964
  10,554
  11,173
Earnings before tax, $m
  11,544
  12,021
  12,525
  13,055
  13,613
  14,200
  14,818
  15,468
  16,151
  16,870
  17,927
  18,722
  19,558
  20,436
  21,359
  22,329
  23,349
  24,420
  25,546
  26,729
  27,971
  29,276
  30,648
  32,088
  33,601
  35,191
  36,860
  38,613
  40,455
  42,389
Tax expense, $m
  3,117
  3,246
  3,382
  3,525
  3,675
  3,834
  4,001
  4,176
  4,361
  4,555
  4,840
  5,055
  5,281
  5,518
  5,767
  6,029
  6,304
  6,593
  6,897
  7,217
  7,552
  7,905
  8,275
  8,664
  9,072
  9,501
  9,952
  10,426
  10,923
  11,445
Net income, $m
  8,427
  8,776
  9,143
  9,530
  9,937
  10,366
  10,817
  11,291
  11,790
  12,315
  13,087
  13,667
  14,277
  14,918
  15,592
  16,300
  17,045
  17,827
  18,648
  19,512
  20,419
  21,372
  22,373
  23,424
  24,529
  25,689
  26,908
  28,188
  29,532
  30,944

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  87,987
  92,149
  96,533
  101,148
  106,006
  111,119
  116,498
  122,155
  128,105
  134,362
  140,939
  147,854
  155,121
  162,759
  170,785
  179,219
  188,080
  197,390
  207,171
  217,445
  228,238
  239,575
  251,483
  263,990
  277,127
  290,923
  305,413
  320,631
  336,612
  353,395
Adjusted assets (=assets-cash), $m
  87,987
  92,149
  96,533
  101,148
  106,006
  111,119
  116,498
  122,155
  128,105
  134,362
  140,939
  147,854
  155,121
  162,759
  170,785
  179,219
  188,080
  197,390
  207,171
  217,445
  228,238
  239,575
  251,483
  263,990
  277,127
  290,923
  305,413
  320,631
  336,612
  353,395
Revenue / Adjusted assets
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
Average production assets, $m
  20,711
  21,691
  22,723
  23,809
  24,953
  26,156
  27,422
  28,754
  30,154
  31,627
  33,175
  34,803
  36,513
  38,311
  40,201
  42,186
  44,272
  46,463
  48,765
  51,184
  53,724
  56,393
  59,196
  62,140
  65,232
  68,480
  71,890
  75,472
  79,234
  83,185
Working capital, $m
  -6,818
  -7,140
  -7,480
  -7,837
  -8,214
  -8,610
  -9,027
  -9,465
  -9,926
  -10,411
  -10,921
  -11,456
  -12,019
  -12,611
  -13,233
  -13,887
  -14,573
  -15,295
  -16,052
  -16,849
  -17,685
  -18,563
  -19,486
  -20,455
  -21,473
  -22,542
  -23,665
  -24,844
  -26,082
  -27,382
Total debt, $m
  28,402
  31,390
  34,537
  37,851
  41,340
  45,010
  48,872
  52,935
  57,207
  61,699
  66,421
  71,386
  76,604
  82,088
  87,851
  93,906
  100,269
  106,953
  113,976
  121,353
  129,102
  137,242
  145,792
  154,772
  164,204
  174,110
  184,514
  195,440
  206,914
  218,965
Total liabilities, $m
  63,175
  66,163
  69,310
  72,624
  76,113
  79,783
  83,645
  87,708
  91,980
  96,472
  101,194
  106,159
  111,377
  116,861
  122,624
  128,679
  135,042
  141,726
  148,749
  156,126
  163,875
  172,015
  180,565
  189,545
  198,977
  208,883
  219,287
  230,213
  241,687
  253,738
Total equity, $m
  24,812
  25,986
  27,222
  28,524
  29,894
  31,336
  32,852
  34,448
  36,126
  37,890
  39,745
  41,695
  43,744
  45,898
  48,161
  50,540
  53,039
  55,664
  58,422
  61,320
  64,363
  67,560
  70,918
  74,445
  78,150
  82,040
  86,127
  90,418
  94,925
  99,657
Total liabilities and equity, $m
  87,987
  92,149
  96,532
  101,148
  106,007
  111,119
  116,497
  122,156
  128,106
  134,362
  140,939
  147,854
  155,121
  162,759
  170,785
  179,219
  188,081
  197,390
  207,171
  217,446
  228,238
  239,575
  251,483
  263,990
  277,127
  290,923
  305,414
  320,631
  336,612
  353,395
Debt-to-equity ratio
  1.140
  1.210
  1.270
  1.330
  1.380
  1.440
  1.490
  1.540
  1.580
  1.630
  1.670
  1.710
  1.750
  1.790
  1.820
  1.860
  1.890
  1.920
  1.950
  1.980
  2.010
  2.030
  2.060
  2.080
  2.100
  2.120
  2.140
  2.160
  2.180
  2.200
Adjusted equity ratio
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8,427
  8,776
  9,143
  9,530
  9,937
  10,366
  10,817
  11,291
  11,790
  12,315
  13,087
  13,667
  14,277
  14,918
  15,592
  16,300
  17,045
  17,827
  18,648
  19,512
  20,419
  21,372
  22,373
  23,424
  24,529
  25,689
  26,908
  28,188
  29,532
  30,944
Depreciation, amort., depletion, $m
  1,548
  1,607
  1,669
  1,735
  1,804
  1,876
  1,953
  2,033
  2,117
  2,206
  1,999
  2,097
  2,200
  2,308
  2,422
  2,541
  2,667
  2,799
  2,938
  3,083
  3,236
  3,397
  3,566
  3,743
  3,930
  4,125
  4,331
  4,547
  4,773
  5,011
Funds from operations, $m
  9,975
  10,383
  10,812
  11,265
  11,741
  12,242
  12,769
  13,324
  13,908
  14,521
  15,085
  15,764
  16,477
  17,226
  18,014
  18,842
  19,712
  20,626
  21,586
  22,595
  23,655
  24,769
  25,939
  27,168
  28,458
  29,814
  31,238
  32,734
  34,305
  35,955
Change in working capital, $m
  -306
  -322
  -340
  -358
  -376
  -396
  -417
  -438
  -461
  -485
  -510
  -536
  -563
  -592
  -622
  -653
  -687
  -721
  -758
  -796
  -836
  -878
  -923
  -969
  -1,018
  -1,069
  -1,123
  -1,179
  -1,238
  -1,300
Cash from operations, $m
  10,281
  10,705
  11,152
  11,622
  12,117
  12,638
  13,186
  13,762
  14,369
  15,006
  15,595
  16,299
  17,040
  17,818
  18,636
  19,495
  20,398
  21,347
  22,344
  23,391
  24,492
  25,647
  26,861
  28,137
  29,476
  30,883
  32,361
  33,913
  35,544
  37,256
Maintenance CAPEX, $m
  -1,193
  -1,248
  -1,307
  -1,369
  -1,434
  -1,503
  -1,576
  -1,652
  -1,732
  -1,817
  -1,905
  -1,999
  -2,097
  -2,200
  -2,308
  -2,422
  -2,541
  -2,667
  -2,799
  -2,938
  -3,083
  -3,236
  -3,397
  -3,566
  -3,743
  -3,930
  -4,125
  -4,331
  -4,547
  -4,773
New CAPEX, $m
  -906
  -980
  -1,032
  -1,086
  -1,144
  -1,203
  -1,266
  -1,332
  -1,401
  -1,473
  -1,548
  -1,628
  -1,711
  -1,798
  -1,889
  -1,985
  -2,086
  -2,191
  -2,302
  -2,419
  -2,541
  -2,669
  -2,803
  -2,944
  -3,092
  -3,248
  -3,411
  -3,582
  -3,762
  -3,951
Cash from investing activities, $m
  -2,099
  -2,228
  -2,339
  -2,455
  -2,578
  -2,706
  -2,842
  -2,984
  -3,133
  -3,290
  -3,453
  -3,627
  -3,808
  -3,998
  -4,197
  -4,407
  -4,627
  -4,858
  -5,101
  -5,357
  -5,624
  -5,905
  -6,200
  -6,510
  -6,835
  -7,178
  -7,536
  -7,913
  -8,309
  -8,724
Free cash flow, $m
  8,182
  8,478
  8,814
  9,167
  9,539
  9,932
  10,344
  10,779
  11,236
  11,717
  12,141
  12,673
  13,233
  13,821
  14,439
  15,088
  15,771
  16,489
  17,243
  18,035
  18,868
  19,742
  20,661
  21,627
  22,641
  23,706
  24,825
  26,001
  27,235
  28,532
Issuance/(repayment) of debt, $m
  2,833
  2,988
  3,147
  3,314
  3,488
  3,671
  3,862
  4,062
  4,272
  4,492
  4,723
  4,964
  5,218
  5,484
  5,763
  6,055
  6,362
  6,685
  7,022
  7,377
  7,749
  8,140
  8,550
  8,980
  9,432
  9,906
  10,404
  10,926
  11,474
  12,050
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  2,833
  2,988
  3,147
  3,314
  3,488
  3,671
  3,862
  4,062
  4,272
  4,492
  4,723
  4,964
  5,218
  5,484
  5,763
  6,055
  6,362
  6,685
  7,022
  7,377
  7,749
  8,140
  8,550
  8,980
  9,432
  9,906
  10,404
  10,926
  11,474
  12,050
Total cash flow (excl. dividends), $m
  11,015
  11,466
  11,961
  12,481
  13,028
  13,602
  14,206
  14,841
  15,508
  16,209
  16,864
  17,638
  18,451
  19,304
  20,201
  21,144
  22,134
  23,173
  24,265
  25,412
  26,617
  27,882
  29,211
  30,607
  32,073
  33,612
  35,229
  36,927
  38,710
  40,582
Retained Cash Flow (-), $m
  -1,121
  -1,174
  -1,236
  -1,302
  -1,370
  -1,442
  -1,517
  -1,595
  -1,678
  -1,764
  -1,855
  -1,950
  -2,049
  -2,154
  -2,263
  -2,378
  -2,499
  -2,625
  -2,758
  -2,897
  -3,044
  -3,197
  -3,358
  -3,527
  -3,704
  -3,891
  -4,086
  -4,291
  -4,507
  -4,733
Prev. year cash balance distribution, $m
  19,513
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  29,406
  10,293
  10,725
  11,179
  11,658
  12,161
  12,690
  13,246
  13,830
  14,445
  15,009
  15,688
  16,401
  17,151
  17,938
  18,765
  19,635
  20,548
  21,507
  22,515
  23,573
  24,685
  25,853
  27,080
  28,368
  29,722
  31,143
  32,635
  34,203
  35,849
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  28,194
  9,423
  9,333
  9,205
  9,036
  8,825
  8,573
  8,279
  7,945
  7,573
  7,128
  6,695
  6,236
  5,758
  5,266
  4,769
  4,272
  3,784
  3,311
  2,861
  2,438
  2,048
  1,694
  1,379
  1,104
  867
  668
  505
  373
  270
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Cisco Systems, Inc. designs and sells a range of products, provides services and delivers integrated solutions to develop and connect networks around the world. The Company operates through three geographic segments: Americas; Europe, the Middle East and Africa (EMEA), and Asia Pacific, Japan and China (APJC). The Company groups its products and technologies into various categories, such as Switching; Next-Generation Network (NGN) Routing; Collaboration; Data Center; Wireless; Service Provider Video; Security, and Other Products. In addition to its product offerings, the Company provides a range of service offerings, including technical support services and advanced services. The Company delivers its technology and services to its customers as solutions for their priorities, including cloud, video, mobility, security, collaboration and analytics. The Company serves customers, including businesses of all sizes, public institutions, governments and service providers.

FINANCIAL RATIOS  of  Cisco Systems, Inc. (CSCO)

Valuation Ratios
P/E Ratio 29.6
Price to Sales 5.9
Price to Book 4.3
Price to Tangible Book
Price to Cash Flow 20.5
Price to Free Cash Flow 22
Growth Rates
Sales Growth Rate -2.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -15.9%
Cap. Spend. - 3 Yr. Gr. Rate -5.4%
Financial Strength
Quick Ratio 9
Current Ratio 0.1
LT Debt to Equity 38.9%
Total Debt to Equity 51%
Interest Coverage 15
Management Effectiveness
Return On Assets 8.2%
Ret/ On Assets - 3 Yr. Avg. 8.9%
Return On Total Capital 10%
Ret/ On T. Cap. - 3 Yr. Avg. 11.1%
Return On Equity 14.8%
Return On Equity - 3 Yr. Avg. 15.9%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 63%
Gross Margin - 3 Yr. Avg. 62.1%
EBITDA Margin 32.2%
EBITDA Margin - 3 Yr. Avg. 31.3%
Operating Margin 24.9%
Oper. Margin - 3 Yr. Avg. 24.2%
Pre-Tax Margin 25.6%
Pre-Tax Margin - 3 Yr. Avg. 24.9%
Net Profit Margin 20%
Net Profit Margin - 3 Yr. Avg. 20%
Effective Tax Rate 21.8%
Eff/ Tax Rate - 3 Yr. Avg. 19.5%
Payout Ratio 57.4%

CSCO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CSCO stock intrinsic value calculation we used $49330 million for the last fiscal year's total revenue generated by Cisco Systems, Inc.. The default revenue input number comes from 0001 income statement of Cisco Systems, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CSCO stock valuation model: a) initial revenue growth rate of 4.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for CSCO is calculated based on our internal credit rating of Cisco Systems, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Cisco Systems, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CSCO stock the variable cost ratio is equal to 74.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $204 million in the base year in the intrinsic value calculation for CSCO stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Cisco Systems, Inc..

Corporate tax rate of 27% is the nominal tax rate for Cisco Systems, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CSCO stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CSCO are equal to 40.1%.

Life of production assets of 16.6 years is the average useful life of capital assets used in Cisco Systems, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CSCO is equal to -13.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $43204 million for Cisco Systems, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 4402.068 million for Cisco Systems, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Cisco Systems, Inc. at the current share price and the inputted number of shares is $251.0 billion.

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