Insights

• Cisco's profitability is strong, with net profit margins significantly above the industry average, but revenue growth is modest.
• The company faces potential liquidity concerns due to a current ratio below 1, which is also lower than the industry average.
• Increasing long-term debt and decreasing cash reserves require careful monitoring to ensure long-term solvency and financial flexibility.
• The acquisition of Splunk has significantly increased intangible assets, and its impact on overall asset performance needs to be evaluated.
• Management needs to focus on controlling operating expenses and improving cash flow generation to sustain growth and shareholder returns.

Analysis

• Revenue - Revenue is showing a slightly increasing trend, indicating potential growth in the company's top line. - The company's revenue growth could be linked to new product launches or market expansion, as mentioned in the earnings call. - The Enterprise Value To Sales ratio is higher than the industry average, suggesting the company may be overvalued relative to its sales.
  • Profitability
    • The Net Profit Margin is showing an increasing trend, suggesting profitability is improving.
    • The Net Profit Margin is significantly higher than the industry average, indicating the company is more profitable than its peers.
    • The increasing trend in Gross Profit Margin indicates the company is managing its cost of goods sold effectively.
  • Liquidity
    • The Current Ratio is below 1, signaling potential liquidity concerns.
    • The Current Ratio is lower than the industry average, indicating the company may have less liquidity than its peers.
    • Cash and short-term investments have been decreasing, which could impact the company's ability to fund operations or make acquisitions.
  • Solvency
    • Long-term debt is increasing, which could raise concerns about long-term solvency if not managed carefully.
    • The Total Debt to Total Equity Ratio is lower than the industry average, indicating the company has less financial leverage than its peers.
    • The increasing debt and relatively stable equity indicate a shift in the capital structure towards more leverage.
  • Operational Efficiency
    • Inventories are decreasing, which may indicate efficient inventory management or potential supply chain issues.
    • The increasing trend in Selling, General & Administrative Expenses suggests the company may need to focus on controlling operating expenses.
    • The company is showing signs of revenue growth, but it needs to manage its operating expenses to improve profitability.
  • Cash Flow Analysis - Net income and operating cash flow have not been consistently aligned, indicating potential earnings quality issues. - Persistent negative free cash flow (FCF) could raise concerns about long-term sustainability. - Declining FCF margin indicates potential challenges in profitability.
  • Risk Factors
    • The low current ratio is a potential red flag.
    • The increasing long-term debt needs to be monitored to ensure the company's solvency is maintained.
    • The presence of non-recurring items could distort the company's sustainable earnings.
  • Future Outlook
    • Monitor the current ratio closely to ensure it remains above critical levels.
    • Evaluate the impact of the Splunk acquisition on intangible assets and overall asset performance.
    • Keep track of long-term debt levels and related interest expenses.

Benchmarks (as of 2025-06-27)

• Performance Comparison:

  • Cisco Systems, Inc. (CSCO) has shown mixed performance compared to the Technology Select Sector SPDR Fund (XLK). Over the past year, CSCO has significantly outperformed XLK, with returns of 48.8% versus 10.77%. However, over longer periods such as 2 and 3 years, CSCO has underperformed XLK. For example, over 3 years, CSCO returned 76.85% compared to XLK's 102.1%. More recently, CSCO has outperformed XLK year-to-date, with returns of 17.73% versus 8.47%.

• Risk and Return Analysis:

  • The annualized returns show that CSCO outperformed XLK over the past year (48.8% vs. 10.77%) but underperformed over 2 and 3 years. The annualized volatility data indicates that CSCO's volatility has generally been lower than XLK's, except for certain periods like Q2 2022 and Q2 2025 where both experienced high volatility. The maximum drawdown for CSCO was -36.68% on 2022-10-12, while for XLK it was -33.56% on the same date, suggesting CSCO experienced slightly larger declines during market downturns.

• Risk-Adjusted Performance:

  • The Sharpe Ratio analysis reveals that XLK has generally offered better risk-adjusted returns compared to CSCO, although there have been periods where CSCO outperformed XLK. The beta values indicate that CSCO is less sensitive to market movements (beta consistently below 1) compared to XLK (beta consistently above 1). This suggests that CSCO is a more stable investment, while XLK is more reactive to market fluctuations.

• Overall Assessment:

  • Cisco Systems, Inc. (CSCO) presents a mixed profile when compared to the Technology Select Sector SPDR Fund (XLK). While CSCO has shown strong recent performance and lower volatility, its longer-term returns and risk-adjusted performance have generally lagged behind XLK. The lower beta of CSCO suggests it is a more stable investment, but this also means it may not capture as much upside during market rallies. Investors should consider their risk tolerance and investment horizon when choosing between CSCO and XLK. If stability and recent outperformance are priorities, CSCO may be suitable. However, if higher long-term returns and risk-adjusted performance are desired, XLK may be a better choice.

Peers Price History(as of 2025-06-27)

• Performance Comparison:
  • Cisco Systems, Inc. (CSCO) has shown mixed performance compared to Motorola Solutions, Inc. (MSI) and Arista Networks, Inc. (ANET). Over the past year, CSCO has significantly outperformed both MSI and ANET, with a return of 48.8% compared to 9.43% and 11.46%, respectively. However, over longer periods (2 and 3 years), CSCO has underperformed both peer companies. For instance, over the last three years, CSCO's return was 76.85%, while MSI's was 106.75% and ANET's was 324.11%.
• Risk and Return Analysis:
  • CSCO's annualized returns have been lower than both MSI and ANET over the 2 and 3-year periods. The 3-year annualized return for CSCO is 20.93%, compared to 27.39% for MSI and 61.87% for ANET.
  • In terms of annualized volatility, CSCO generally exhibits moderate levels. Reviewing the period between Q3 2022 and Q2 2025, CSCO's volatility has ranged from approximately 10% to 47%. In comparison, MSI's volatility has been lower, while ANET's has been significantly higher, indicating that CSCO falls in the middle in terms of risk.
  • CSCO's maximum drawdown was -36.68% on 2022-10-12, which is higher than MSI's -23.1% but lower than ANET's -50.42%. This suggests that CSCO carries a moderate level of risk compared to its peers.
• Risk-Adjusted Performance:
  • CSCO's Sharpe Ratio has generally been lower than MSI's, indicating that MSI has offered better risk-adjusted returns. Throughout the period, MSI consistently showed a higher Sharpe ratio than CSCO. ANET's Sharpe Ratio was generally higher than CSCO, but lower than MSI.
  • CSCO's beta values have generally been below 1, indicating that the stock is less sensitive to market movements compared to ANET, which has a beta consistently above 1.
• Overall Assessment:
  • CSCO has shown strong recent performance over the past year, outperforming both MSI and ANET. However, its longer-term performance has been weaker, with lower annualized returns and higher drawdowns compared to its peers. MSI has demonstrated more consistent risk-adjusted returns, as indicated by its higher Sharpe Ratio and lower volatility. ANET, while offering higher potential returns, also carries significantly higher risk, as evidenced by its higher beta and maximum drawdown.
  • A key trend is the recent outperformance of CSCO in the short term, contrasting with its underperformance over longer time horizons. This suggests that recent market conditions may be more favorable for CSCO, but investors should be cautious about extrapolating this trend into the future.

Peers Fundamentals(as of 2025-04-30)

1. Market Position and Size:

   • Cisco Systems, Inc. (CSCO) holds a dominant market position due to its significantly larger market capitalization of $252,303.15 million compared to Motorola Solutions, Inc. (MSI) at $70,593.78 million and Arista Networks, Inc. (ANET) at $120,153.87 million.
   • CSCO's substantial market cap is supported by its higher revenue ($55,623 million) compared to MSI ($10,956 million) and ANET ($7,436.57 million). Similarly, CSCO's EBITDA ($15,100 million) and Net Income ($9,792 million) are considerably larger than those of its peers.
   • CSCO's relative size and market position within the peer group is dominant due to its significantly larger size, as reflected in its market capitalization, revenue, and earnings. This suggests a more established and diversified business compared to its peers.

2. Profitability and Efficiency:

   • CSCO's Gross Profit Margin of 63.56% is slightly less than ANET's 64.09% but significantly greater than MSI's 50.16% and the industry average of 28.26%.
   • CSCO's EBITDA Margin of 27.15% is less than MSI's 28.82% and ANET's 43.08%, but substantially greater than the industry average of -25.39%.
   • CSCO's Net Profit Margin of 17.6% is less than MSI's 18.67% and ANET's 40.72%, but significantly greater than the industry average of -54.72%.
   • Despite having the largest market cap and revenue, CSCO's profitability margins are not the highest among its peers, indicating potential inefficiencies or different business strategies. However, CSCO's profitability is strong compared to the industry average.
   • CSCO is less efficient in generating returns compared to its peers, as indicated by its lower ROA, ROE, ROTC, and ROIC. However, its returns are still positive and above the industry average.

3. Financial Health and Stability:

   • CSCO's Current Ratio of 0.91 is less than MSI (1.18), ANET (3.93), and the industry average (2.3), indicating potential liquidity concerns.
   • CSCO's Quick Ratio of 0.83 is less than MSI (1.02), ANET (3.31), and the industry average (1.64), further suggesting liquidity challenges.
   • CSCO's Total Debt to Total Equity Ratio of 66.93 is less than MSI (397.62) but greater than ANET (0.0). It is also less than the industry average (113.63).
   • CSCO's Debt / EBITDA ratio of 1.94 is slightly greater than MSI (1.9) but significantly greater than ANET (0.0). It is also less than the industry average (18.77).
   • CSCO's liquidity ratios are below industry averages and peer levels, suggesting potential short-term financial risk. However, its debt levels are manageable compared to MSI and the industry average.

4. Valuation and Market Perception:

   • CSCO's Enterprise Value To Sales ratio of 4.32 is greater than the industry average (2.56) but less than MSI (7.17) and ANET (12.23).
   • CSCO's Enterprise Value To EBITDA ratio of 15.83 is less than MSI (24.69), ANET (28.4), and the industry average (47.56).
   • CSCO's Price To Earnings ratio of 25.99 is less than MSI (35.28), ANET (40.47), and the industry average (67.61).
   • CSCO's Price to Book Ratio of 5.54 is less than MSI (43.01), ANET (11.88), and the industry average (9.53).
   • CSCO's Price To Sales Ratio of 4.56 is less than MSI (6.55) and ANET (16.46) but greater than the industry average (2.27).
   • CSCO appears undervalued compared to its peers and the industry average based on several valuation metrics, particularly EV/EBITDA and P/E ratios.

5. Cash Flow and Capital Management:

   • CSCO's Net Operating Cash Flow of $13,689 million is significantly greater than MSI ($2,519 million) and ANET ($3,836.13 million).
   • CSCO's Total Capital Expenditure of $886 million is significantly greater than MSI ($248 million) and ANET ($51.04 million).
   • CSCO's Free Cash Flow of $12,803 million is significantly greater than MSI ($2,271 million) and ANET ($3,785.09 million).
   • CSCO generates significantly more cash flow than its peers, reflecting its larger scale and established market position.

6. Growth and Future Prospects:

   • CSCO shows inferior growth in Sales/Revenue, EBITDA, Net Income, Basic Earnings per Share, Free Cash Flow, and EBIT Margin compared to its peers.
   • Growth rates have been generally decreasing over the 5-year period for most metrics, indicating a potential slowdown in CSCO's growth.
   • CSCO's most recent year-over-year growth rates are generally lower than its 5-year CAGRs, indicating a deceleration trend.
   • The lack of revenue growth coupled with declining profit margins is a potential red flag.

7. Potential for Investment:

   • From an investment perspective, CSCO presents a mixed picture. Its large size and strong cash flow generation provide stability, but its slower growth rates and lower returns on investment may limit its upside potential.
   • While its valuation metrics suggest it may be undervalued, investors should carefully consider its growth prospects and efficiency compared to its peers before making an investment decision.

8. Key Risks and Considerations:

   • CSCO's slower growth rates compared to peers pose a risk to its market share and competitive position.
   • Its lower liquidity ratios compared to peers and industry averages raise concerns about its short-term financial flexibility.
   • The potential for declining profit margins and returns on investment could negatively impact its future earnings and shareholder value.

9. Overall Assessment:

   • CSCO exhibits strong financial health due to its large size, substantial cash flow generation, and solid gross profit margin. However, its growth rates are lagging behind peers, and its liquidity ratios raise some concerns.
   • While its returns on investment are positive, they are not as high as its competitors. Overall, CSCO is financially stable but needs to improve its growth and efficiency to maintain its competitive edge.