Tech giant Apple Inc. (AAPL) reported net income of $19.44 billion for the third quarter ended June 25, 2022, down 10.6% year-on-year, while its EPS came in at 1, $20, down 7.7% year over year.
The stock is trading at a rich valuation. Its forward EV/EBITDA of 18.72x is 48.7% above the industry average of 12.59x. Its forward price/cash flow of 20.56x is 22.7% above the industry average of 16.76x. The stock has lost 9.8% in the past month and 12.5% since the start of the year.
On the other hand, Cisco Systems, Inc. (CSCO) designs, manufactures and sells Internet Protocol-based networks and other products related to the communications and information technology industry in the Americas, Europe, Middle East, Africa, Asia- Pacific, Japan and China.
On August 17, 2022, Chuck Robbins, President and CEO of CSCO said, “Product orders and backlog for the full year are both at record highs and reflect the strong demand that we continue to to see for our innovation and the overall value we bring to our customers. as they accelerate their digital transformation.
CSCO has lost 5.7% over the past month to close the latest trading session at $43.00. Moreover, the stock has lost 30.6% since the start of the year. However, it has gained 2.5% over the past three months.
Here’s what could shape CSCO’s performance in the near term:
CSCO’s forecast EV/EBITDA of 8.76x is 30.4% below the industry average of 12.59x. Its forward price/cash flow of 10.94x is 34.7% below the industry average of 16.76x. Moreover, its front PER of 14.89x is 29.8% lower than the industry average of 21.21x.
Favorable analyst expectations
Analysts expect CSCO’s revenue to grow 5% and 4% year-over-year in 2023 and 2024, respectively, while its EPS is expected to grow 5.1% and 7.6% year-over-year in 2023 and 2024, respectively. Additionally, its EPS is expected to grow 6.7% annually over the next five years. The stock has exceeded EPS estimates in the previous four quarters.
Of the 19 Wall Street analysts who rated CSCO, eight rated it Buy, ten rated it Hold and only one rated it Sell. Additionally, Wall Street analysts expect the stock to hit $54.63 in the near term, indicating a 27.2% upside potential.
Robust profit margins
CSCO’s trailing 12-month gross profit margin of 62.55% is 24.2% higher than the industry average of 50.35%. Its 12-month EBITDA and net profit margins of 30.84% and 22.91% are above industry averages of 13.05% and 4.28%.
Additionally, its 12-month ROCE, ROTC and ROTA of 29.15%, 16.81% and 12.57% compared to industry averages of 7.28%, 3.97% and 2.84%, respectively .
POWR ratings reflect promising outlook
CSCO has an overall rating of B, which is equivalent to buying into our own POWR Rankings system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A rating for quality, consistent with its industry-leading profit margins. Additionally, the title has a C rating for stability, in sync with its 24-month beta of 0.86.
Within 50 shares Technology – Communication/Networking industry, CSCO is ranked #5. Click on here for additional POWR ratings for CSCO (Growth, Value, Momentum and Sentiment).
See all the most important actions of the sector Technology – Communication/Network here.
CSCO’s EPS has grown at a CAGR of 2.6% over the past three years. Moreover, analysts are optimistic about its near-term prospects. Although AAPL has generated strong returns over the past few years, I believe CSCO could be a strong technology player in the years to come and be an ideal addition to your portfolio.
How does Cisco Systems, Inc. (CSCO) compare to its peers?
While CSCO has an overall POWR rating of B, one might consider looking at its industry peers, AudioCodes Ltd. (CAD), Viavi Solutions Inc. (VAV) and Extreme Networks, Inc. (OUTSIDE), which have an overall rating of A (Strong Buy).
CSCO shares were trading at $43.30 per share on Friday afternoon, up $0.01 (+0.02%). Year-to-date, the CSCO is down -30.17%, compared to a -18.22% rise in the benchmark S&P 500 over the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, she helps investors make informed investment decisions through her insightful commentary. After…