Storm The Castle Stock Of The Day: Cisco Systems (CSCO)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Cisco Systems ( CSCO) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Cisco Systems as such a stock due to the following factors:

  • CSCO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $1.2 billion.
  • CSCO has traded 52.8 million shares today.
  • CSCO is trading at 2.21 times the normal volume for the stock at this time of day.
  • CSCO crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on CSCO:

Cisco Systems, Inc. designs, manufactures, and sells Internet protocol (IP) and other products related to the communications and information technology industry worldwide. The stock currently has a dividend yield of 3.5%. CSCO has a PE ratio of 14.2. Currently there are 17 analysts that rate Cisco Systems a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Cisco Systems has been 43.7 million shares per day over the past 30 days. Cisco Systems has a market cap of $115.0 billion and is part of the technology sector and computer hardware industry. The stock has a beta of 1.27 and a short float of 1.2% with 1.48 days to cover. Shares are down 0.1% year-to-date as of the close of trading on Monday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Cisco Systems as a buy. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • CISCO SYSTEMS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CISCO SYSTEMS INC increased its bottom line by earning $1.86 versus $1.49 in the prior year. This year, the market expects an improvement in earnings ($1.99 versus $1.86).
  • Despite currently having a low debt-to-equity ratio of 0.31, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that CSCO's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.42 is high and demonstrates strong liquidity.
  • The gross profit margin for CISCO SYSTEMS INC is rather high; currently it is at 64.07%. Regardless of CSCO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 12.78% trails the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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