Tremendous Value In Cisco

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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.

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