If you’d told me in 2000 that one day we’d own Cisco, I’d have said you were crazy.
– Russell Croft , Co-Manager, Croft Value Fund, quoted in "Value Funds Awash In Deluge of Choices: Market Rout has Cut P/Es; Cisco? Yes!" (subscription required – e-mail me for a copy), The Wall Street Journal, Tuesday February 3
Cisco (CSCO) reported a tough quarter after the close yesterday (CSCO Earnings Release ). Revenues were down 7.5% and Net Income 21.5%. Still, they beat analyst EPS estimates: 32 cents vs. 30 cents. The stock is acting well today – up 3.5%.
The bottom line is that this stock is already really cheap and presents tremendous value. They have $4 a share in net cash and short term investments so you get the business for $12+. They earned $1.56 in their last fiscal year and analysts are projecting $1.33 for this year. That’s a forward multiple of 9-10 after you back out the net cash.
This is a great, category killing, leading company. They have a fortress balance sheet and are a key player in the ongoing global broadband buildout. It’s hard to see how you lose long term at these prices.
Disclosure: Top Gun has no position in Cisco (CSCO) shares.