Intrinsic value of Cisco Systems - CSCO

Previous Close

$45.16

  Intrinsic Value

$37.63

stock screener

  Rating & Target

hold

-17%

Previous close

$45.16

 
Intrinsic value

$37.63

 
Up/down potential

-17%

 
Rating

hold

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 2017), $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 226.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  48,965
  50,091
  51,379
  52,824
  54,425
  56,183
  58,096
  60,167
  62,398
  64,793
  67,355
  70,089
  72,999
  76,093
  79,375
  82,853
  86,536
  90,429
  94,544
  98,888
  103,471
  108,305
  113,401
  118,769
  124,423
  130,377
  136,643
  143,236
  150,173
  157,470
Variable operating expenses, $m
  21,823
  22,250
  22,739
  23,288
  23,896
  24,563
  25,290
  26,076
  26,924
  27,833
  25,575
  26,613
  27,718
  28,893
  30,139
  31,460
  32,858
  34,336
  35,899
  37,548
  39,289
  41,124
  43,059
  45,097
  47,244
  49,505
  51,884
  54,388
  57,022
  59,792
Fixed operating expenses, $m
  15,210
  15,545
  15,887
  16,237
  16,594
  16,959
  17,332
  17,713
  18,103
  18,501
  18,908
  19,324
  19,749
  20,184
  20,628
  21,082
  21,545
  22,019
  22,504
  22,999
  23,505
  24,022
  24,551
  25,091
  25,643
  26,207
  26,783
  27,373
  27,975
  28,590
Total operating expenses, $m
  37,033
  37,795
  38,626
  39,525
  40,490
  41,522
  42,622
  43,789
  45,027
  46,334
  44,483
  45,937
  47,467
  49,077
  50,767
  52,542
  54,403
  56,355
  58,403
  60,547
  62,794
  65,146
  67,610
  70,188
  72,887
  75,712
  78,667
  81,761
  84,997
  88,382
Operating income, $m
  11,932
  12,296
  12,752
  13,299
  13,936
  14,660
  15,474
  16,378
  17,372
  18,459
  22,872
  24,151
  25,532
  27,016
  28,608
  30,312
  32,132
  34,073
  36,141
  38,341
  40,678
  43,159
  45,791
  48,581
  51,537
  54,665
  57,975
  61,476
  65,177
  69,088
EBITDA, $m
  18,644
  19,088
  19,636
  20,286
  21,036
  21,885
  22,835
  23,886
  25,039
  26,296
  27,661
  29,135
  30,722
  32,426
  34,252
  36,203
  38,285
  40,503
  42,863
  45,371
  48,035
  50,860
  53,854
  57,026
  60,383
  63,935
  67,691
  71,660
  75,854
  80,284
Interest expense (income), $m
  897
  1,389
  1,452
  1,523
  1,604
  1,694
  1,795
  1,905
  2,025
  2,155
  2,295
  2,445
  2,606
  2,777
  2,959
  3,153
  3,359
  3,577
  3,808
  4,052
  4,310
  4,583
  4,870
  5,173
  5,493
  5,830
  6,184
  6,557
  6,950
  7,364
  7,799
Earnings before tax, $m
  10,543
  10,843
  11,229
  11,696
  12,241
  12,866
  13,569
  14,353
  15,217
  16,164
  20,427
  21,546
  22,755
  24,057
  25,455
  26,953
  28,555
  30,265
  32,089
  34,030
  36,095
  38,289
  40,618
  43,088
  45,707
  48,481
  51,418
  54,526
  57,813
  61,289
Tax expense, $m
  2,847
  2,928
  3,032
  3,158
  3,305
  3,474
  3,664
  3,875
  4,109
  4,364
  5,515
  5,817
  6,144
  6,495
  6,873
  7,277
  7,710
  8,172
  8,664
  9,188
  9,746
  10,338
  10,967
  11,634
  12,341
  13,090
  13,883
  14,722
  15,610
  16,548
Net income, $m
  7,696
  7,916
  8,197
  8,538
  8,936
  9,392
  9,906
  10,477
  11,109
  11,800
  14,912
  15,729
  16,611
  17,561
  18,582
  19,675
  20,845
  22,094
  23,425
  24,842
  26,349
  27,951
  29,651
  31,454
  33,366
  35,391
  37,535
  39,804
  42,204
  44,741

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
  88,705
  90,745
  93,077
  95,696
  98,597
  101,780
  105,246
  108,998
  113,041
  117,379
  122,020
  126,972
  132,245
  137,849
  143,795
  150,097
  156,767
  163,821
  171,275
  179,144
  187,448
  196,205
  205,436
  215,161
  225,405
  236,189
  247,541
  259,486
  272,053
  285,271
Adjusted assets (=assets-cash), $m
  88,705
  90,745
  93,077
  95,696
  98,597
  101,780
  105,246
  108,998
  113,041
  117,379
  122,020
  126,972
  132,245
  137,849
  143,795
  150,097
  156,767
  163,821
  171,275
  179,144
  187,448
  196,205
  205,436
  215,161
  225,405
  236,189
  247,541
  259,486
  272,053
  285,271
Revenue / Adjusted assets
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
Average production assets, $m
  34,814
  35,615
  36,530
  37,558
  38,696
  39,946
  41,306
  42,779
  44,365
  46,068
  47,889
  49,833
  51,902
  54,102
  56,436
  58,909
  61,527
  64,295
  67,221
  70,309
  73,568
  77,005
  80,628
  84,445
  88,465
  92,698
  97,153
  101,841
  106,773
  111,961
Working capital, $m
  245
  250
  257
  264
  272
  281
  290
  301
  312
  324
  337
  350
  365
  380
  397
  414
  433
  452
  473
  494
  517
  542
  567
  594
  622
  652
  683
  716
  751
  787
Total debt, $m
  26,896
  28,204
  29,699
  31,377
  33,236
  35,277
  37,499
  39,904
  42,495
  45,276
  48,251
  51,425
  54,805
  58,397
  62,209
  66,248
  70,524
  75,045
  79,823
  84,868
  90,190
  95,804
  101,720
  107,954
  114,520
  121,433
  128,710
  136,367
  144,422
  152,895
Total liabilities, $m
  56,860
  58,168
  59,663
  61,341
  63,200
  65,241
  67,463
  69,868
  72,459
  75,240
  78,215
  81,389
  84,769
  88,361
  92,173
  96,212
  100,488
  105,009
  109,787
  114,832
  120,154
  125,768
  131,684
  137,918
  144,484
  151,397
  158,674
  166,331
  174,386
  182,859
Total equity, $m
  31,845
  32,577
  33,415
  34,355
  35,396
  36,539
  37,783
  39,130
  40,582
  42,139
  43,805
  45,583
  47,476
  49,488
  51,623
  53,885
  56,279
  58,812
  61,488
  64,313
  67,294
  70,438
  73,751
  77,243
  80,920
  84,792
  88,867
  93,156
  97,667
  102,412
Total liabilities and equity, $m
  88,705
  90,745
  93,078
  95,696
  98,596
  101,780
  105,246
  108,998
  113,041
  117,379
  122,020
  126,972
  132,245
  137,849
  143,796
  150,097
  156,767
  163,821
  171,275
  179,145
  187,448
  196,206
  205,435
  215,161
  225,404
  236,189
  247,541
  259,487
  272,053
  285,271
Debt-to-equity ratio
  0.840
  0.870
  0.890
  0.910
  0.940
  0.970
  0.990
  1.020
  1.050
  1.070
  1.100
  1.130
  1.150
  1.180
  1.210
  1.230
  1.250
  1.280
  1.300
  1.320
  1.340
  1.360
  1.380
  1.400
  1.420
  1.430
  1.450
  1.460
  1.480
  1.490
Adjusted equity ratio
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7,696
  7,916
  8,197
  8,538
  8,936
  9,392
  9,906
  10,477
  11,109
  11,800
  14,912
  15,729
  16,611
  17,561
  18,582
  19,675
  20,845
  22,094
  23,425
  24,842
  26,349
  27,951
  29,651
  31,454
  33,366
  35,391
  37,535
  39,804
  42,204
  44,741
Depreciation, amort., depletion, $m
  6,712
  6,792
  6,884
  6,986
  7,100
  7,225
  7,361
  7,508
  7,667
  7,837
  4,789
  4,983
  5,190
  5,410
  5,644
  5,891
  6,153
  6,430
  6,722
  7,031
  7,357
  7,701
  8,063
  8,444
  8,847
  9,270
  9,715
  10,184
  10,677
  11,196
Funds from operations, $m
  14,408
  14,708
  15,081
  15,524
  16,036
  16,617
  17,267
  17,986
  18,776
  19,637
  19,701
  20,712
  21,801
  22,971
  24,225
  25,566
  26,998
  28,523
  30,147
  31,873
  33,706
  35,651
  37,714
  39,899
  42,213
  44,661
  47,250
  49,988
  52,881
  55,937
Change in working capital, $m
  5
  6
  6
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  15
  16
  17
  18
  19
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
Cash from operations, $m
  14,403
  14,702
  15,075
  15,517
  16,028
  16,608
  17,257
  17,975
  18,764
  19,625
  19,688
  20,698
  21,787
  22,956
  24,209
  25,549
  26,979
  28,504
  30,126
  31,851
  33,683
  35,627
  37,688
  39,872
  42,184
  44,631
  47,219
  49,955
  52,846
  55,900
Maintenance CAPEX, $m
  -3,413
  -3,481
  -3,561
  -3,653
  -3,756
  -3,870
  -3,995
  -4,131
  -4,278
  -4,437
  -4,607
  -4,789
  -4,983
  -5,190
  -5,410
  -5,644
  -5,891
  -6,153
  -6,430
  -6,722
  -7,031
  -7,357
  -7,701
  -8,063
  -8,444
  -8,847
  -9,270
  -9,715
  -10,184
  -10,677
New CAPEX, $m
  -685
  -801
  -915
  -1,028
  -1,139
  -1,249
  -1,360
  -1,473
  -1,586
  -1,703
  -1,822
  -1,944
  -2,069
  -2,199
  -2,334
  -2,473
  -2,618
  -2,769
  -2,925
  -3,089
  -3,259
  -3,437
  -3,623
  -3,817
  -4,020
  -4,233
  -4,455
  -4,688
  -4,932
  -5,188
Cash from investing activities, $m
  -4,098
  -4,282
  -4,476
  -4,681
  -4,895
  -5,119
  -5,355
  -5,604
  -5,864
  -6,140
  -6,429
  -6,733
  -7,052
  -7,389
  -7,744
  -8,117
  -8,509
  -8,922
  -9,355
  -9,811
  -10,290
  -10,794
  -11,324
  -11,880
  -12,464
  -13,080
  -13,725
  -14,403
  -15,116
  -15,865
Free cash flow, $m
  10,306
  10,420
  10,598
  10,836
  11,134
  11,489
  11,902
  12,372
  12,900
  13,486
  13,259
  13,966
  14,734
  15,566
  16,465
  17,432
  18,470
  19,582
  20,771
  22,041
  23,393
  24,834
  26,365
  27,992
  29,720
  31,552
  33,494
  35,552
  37,730
  40,035
Issuance/(repayment) of debt, $m
  1,171
  1,308
  1,495
  1,678
  1,860
  2,040
  2,222
  2,405
  2,591
  2,781
  2,975
  3,174
  3,380
  3,592
  3,812
  4,039
  4,276
  4,522
  4,778
  5,044
  5,323
  5,613
  5,917
  6,234
  6,566
  6,913
  7,276
  7,657
  8,055
  8,473
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  
  1,171
  1,308
  1,495
  1,678
  1,860
  2,040
  2,222
  2,405
  2,591
  2,781
  2,975
  3,174
  3,380
  3,592
  3,812
  4,039
  4,276
  4,522
  4,778
  5,044
  5,323
  5,613
  5,917
  6,234
  6,566
  6,913
  7,276
  7,657
  8,055
  8,473
Total cash flow (excl. dividends), $m
  11,477
  11,728
  12,093
  12,515
  12,993
  13,530
  14,124
  14,777
  15,491
  16,267
  16,234
  17,140
  18,114
  19,158
  20,277
  21,471
  22,746
  24,104
  25,549
  27,085
  28,716
  30,447
  32,282
  34,226
  36,286
  38,465
  40,771
  43,209
  45,785
  48,508
Retained Cash Flow (-), $m
  -625
  -732
  -837
  -940
  -1,042
  -1,143
  -1,244
  -1,347
  -1,451
  -1,557
  -1,666
  -1,778
  -1,893
  -2,012
  -2,135
  -2,262
  -2,395
  -2,532
  -2,676
  -2,825
  -2,981
  -3,144
  -3,314
  -3,491
  -3,677
  -3,872
  -4,075
  -4,288
  -4,512
  -4,745
Prev. year cash balance distribution, $m
  34,917
  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
  1,392
  1,420
  1,453
  1,490
  1,532
  1,578
  1,629
  1,685
  1,745
  1,810
  1,879
  1,953
  2,033
  2,117
  2,207
  2,302
  2,403
  2,510
  2,622
  2,742
  2,868
  3,001
  3,141
  3,289
  3,444
  3,608
  3,781
  3,963
  4,154
  4,355
Cash available for distribution, $m
  45,768
  10,995
  11,255
  11,575
  11,952
  12,387
  12,880
  13,430
  14,040
  14,710
  14,568
  15,362
  16,221
  17,147
  18,142
  19,209
  20,351
  21,572
  22,873
  24,260
  25,735
  27,303
  28,968
  30,735
  32,608
  34,593
  36,695
  38,920
  41,274
  43,763
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
  43,882
  10,066
  9,795
  9,531
  9,264
  8,990
  8,701
  8,394
  8,065
  7,712
  6,918
  6,556
  6,167
  5,756
  5,326
  4,881
  4,428
  3,973
  3,522
  3,083
  2,662
  2,265
  1,899
  1,565
  1,269
  1,009
  788
  602
  451
  330
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 (CSCO)

Valuation Ratios
P/E Ratio 23.4
Price to Sales 4.7
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 16.2
Price to Free Cash Flow 17.4
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 $48005 million for the last fiscal year's total revenue generated by Cisco Systems. The default revenue input number comes from 2017 income statement of Cisco Systems. 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 2% 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, 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.
    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 44.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $14883 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.

Corporate tax rate of 27% is the nominal tax rate for Cisco Systems. 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 2.9%.

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 71.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Cisco Systems 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 0.5%. 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 - $66137 million for Cisco Systems - 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 5010 million for Cisco Systems 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 at the current share price and the inputted number of shares is $226.3 billion.

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COMPANY NEWS

▶ Cisco revenue is growing again, and headed for more   [Aug-17-18 06:57AM  MarketWatch]
▶ Cisco Shows It Can Still Grow   [05:00PM  Motley Fool]
▶ Walmart and Symantec jump; JC Penney tumbles   [04:24PM  Associated Press]
▶ Cisco CEO on earnings and growth   [09:10AM  CNBC Videos]
▶ [$$] Cisco Is Getting Its Groove Back   [08:45PM  The Wall Street Journal]
▶ [$$] Cisco Extends Growth Streak on Strong Software Sales   [08:45PM  The Wall Street Journal]
▶ Cisco rises on strong earnings   [04:44PM  CNBC]
▶ Cisco: Fiscal 4Q Earnings Snapshot   [04:37PM  Associated Press]
▶ Cisco Systems Q4 Earnings Preview   [08:05AM  Benzinga]
▶ [$$] Cisco Aims to Keep Revenue Growth Rolling   [05:30AM  The Wall Street Journal]
▶ Cisco Earnings Preview: 3 Quarters of Growth   [Aug-14-18 08:05PM  Motley Fool]
▶ 2 Great Income Stocks That Could Double Their Dividends   [Aug-12-18 10:31AM  Motley Fool]
▶ Cramer Remix: This is the earnings call to listen to   [Aug-10-18 07:00PM  CNBC Videos]
▶ 3 Dividend Stocks Perfect for Retirees   [07:03AM  Motley Fool]
▶ [$$] Arista to Pay Cisco $400 Million as Companies Settle IP Disputes   [Aug-06-18 08:41PM  The Wall Street Journal]
▶ Arista to pay Cisco $400 million to settle protracted IP battle   [03:17PM  American City Business Journals]
▶ [$$] Fall of the House of Fraser   [12:00AM  Financial Times]
▶ [$$] Cisco Adds to Cybersecurity Offerings With Purchase of Duo   [Aug-02-18 07:42PM  The Wall Street Journal]
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