Cisco Shares Riding The NASDAQ Wave

Cisco Systems, Inc. CSCO has been on a beautiful run since the October 2014 low of $22.56. Shares are up about 30 percent since then, which far exceeds the return of the broader market during the same time frame.

Is Cisco a beneficiary of large-cap tech buying or is there something going on within the company that is spurring on this type of rally? Let's take a look at Cisco's numbers.

What The Bulls See

• A healthy 2.8 percent annual dividend yield.
• Some cheap valuation metrics: Price to sales ratio of 3.21, price to book ratio of 2.67 and a P/E of just over 12 versus the S&P P/E of over 22.
• Eight percent net profit margins that spin off over $9 billion in annual positive levered free cash flow.
• Strong balance sheet metrics: Cash of $53 billion that easily trumps the debt of $20.52 billion that the company carries, a current ratio of 3.39 and total debt to equity ratio of 35.55 percent.

What The Bears See

• Some pricey valuation metrics: Market capitalization of $152.52 billion which easily exceeds the enterprise value of $121.61 billion and the P/E of 12 doesn't look as cheap when compared to single-digit revenue and EPS growth estimates.

The Technical Take

Technicians note that Cisco shares recently managed to break out above long-term horizontal line resistance at $29.39. That level is now the first level of support for Cisco. Below that, there is an upside gap that could eventually be filled with a decline to $26.90.

The next level of projected resistance for Cisco comes in at the upper edge of the long-term uptrend channel at around $32.26. From Tuesday morning's level of approximately $29.97, technicians were saying the play may be to wait for a re-test of the breakout level of $29.39 before jumping in on the long side.

Overall

Cisco may continue to ride the NASDAQ's momentum as long as it lasts. However, there appears to be a lack of organic growth in Cisco that may cap the future potential for the stock.