This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Cisco Could Lag Peers as Economy Rebounds

SAN JOSE, Calif. ( TheStreet) -- Cisco Systems (CSCO - Get Report) helped give the market a shot in the arm last week when it posted better-than-expected quarterly results.

The San Jose, Calif.-based company reported a profit of 36 cents a share for its fiscal first quarter, topping the 31-cent estimate of analysts. Sales sank 13% to $9 billion, beating expectations for $8.7 billion. Unlike some companies that relied on cost cutting to exceed estimates, Cisco managed to stabilize its sales.

Cisco's products make up the bones of computer systems. Its strong results suggest spending is ramping up as companies look to upgrade infrastructure, a sign that the economy may be improving. Sales projections for a 1% to 4% gain during its current quarter probably left some investors wondering whether they should expand their holdings.

There are several reasons for investors to jump on Cisco shares, which we rate "buy." With a price-to-earnings ratio of 16 versus an industry average of 31, the stock is cheap. Tech companies traditionally trade at elevated multiples because of their growth potential.

The stock has run up 37% during the past year, beating the S&P 500 Index's 22% gain, but trailing the 50% advance of the S&P 500 Information Technology Index. It's the fourth-best performing member of the Dow Jones Industrial Average this year. With a beta value of 1.2, the stock is not much more volatile than the broader market.

Big investments in research and development usually hurt tech companies' balance sheets, but Cisco's financial position is enviable. A current ratio of about 3.4 and low debt make it fairly secure.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CSCO $27.24 0.00%
AAPL $118.03 0.00%
FB $105.41 0.00%
GOOG $748.15 0.00%
TSLA $229.64 0.00%


Chart of I:DJI
DOW 17,813.39 +1.20 0.01%
S&P 500 2,088.87 -0.27 -0.01%
NASDAQ 5,116.1430 +13.3350 0.26%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs