Evaluating Cisco Systems Against Peers In Communications Equipment Industry

In the dynamic and cutthroat world of business, conducting thorough company analysis is essential for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating Cisco Systems CSCO and its primary competitors in the Communications Equipment industry. By closely examining key financial metrics, market position, and growth prospects, our aim is to provide valuable insights for investors and shed light on company's performance within the industry.

Cisco Systems Background

Cisco Systems is the largest provider of networking equipment in the world and one of the largest software companies in the world. Its largest businesses are selling networking hardware and software (where it has leading market shares) and cybersecurity software like firewalls. It also has collaboration products, like its Webex suite, and observability tools. It primarily outsources its manufacturing to third parties and has a large sales and marketing staff—25,000 strong across 90 countries. Overall, Cisco employees 80,000 employees and sells its products globally.

Company P/E P/B P/S ROE EBITDA (in billions) Gross Profit (in billions) Revenue Growth
Cisco Systems Inc 15.04 4.47 3.51 8.12% $4.95 $9.56 7.6%
Arista Networks Inc 44.43 12.77 15.10 8.82% $0.62 $0.94 28.27%
Motorola Solutions Inc 33.16 150.35 5.74 132.76% $0.73 $1.28 7.71%
Nokia Oyj 27.55 0.89 0.83 -0.21% $0.83 $2.38 14.55%
Juniper Networks Inc 38.98 2.64 2.17 2.82% $0.19 $0.81 -2.36%
F5 Inc 23.90 3.77 3.93 4.89% $0.2 $0.56 -1.11%
Ciena Corp 32.63 2.84 1.90 3.15% $0.13 $0.49 16.32%
Calix Inc 73.67 3.09 2.26 -0.56% $-0.0 $0.11 0.34%
Viavi Solutions Inc 444 2.71 1.96 1.53% $0.04 $0.15 -10.54%
Extreme Networks Inc 20.45 14.60 1.21 3.68% $0.02 $0.18 -6.9%
Harmonic Inc 17.97 3.33 2.50 21.56% $0.01 $0.08 31.36%
Digi International Inc 66.88 1.92 2.39 -0.56% $0.01 $0.06 -2.94%
Aviat Networks Inc 28.46 1.77 1.20 1.8% $0.01 $0.03 7.77%
Clearfield Inc 34.88 1.38 1.98 -1.71% $-0.0 $0.0 -60.17%
Average 68.23 15.54 3.32 13.69% $0.21 $0.54 1.72%

Upon a comprehensive analysis of Cisco Systems, the following trends can be discerned:

  • With a Price to Earnings ratio of 15.04, which is 0.22x less than the industry average, the stock shows potential for growth at a reasonable price, making it an interesting consideration for market participants.

  • Considering a Price to Book ratio of 4.47, which is well below the industry average by 0.29x, the stock may be undervalued based on its book value compared to its peers.

  • With a relatively high Price to Sales ratio of 3.51, which is 1.06x the industry average, the stock might be considered overvalued based on sales performance.

  • With a Return on Equity (ROE) of 8.12% that is 5.57% below the industry average, it appears that the company exhibits potential inefficiency in utilizing equity to generate profits.

  • The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $4.95 Billion is 23.57x above the industry average, highlighting stronger profitability and robust cash flow generation.

  • With higher gross profit of $9.56 Billion, which indicates 17.7x above the industry average, the company demonstrates stronger profitability and higher earnings from its core operations.

  • The company's revenue growth of 7.6% exceeds the industry average of 1.72%, indicating strong sales performance and market outperformance.

Debt To Equity Ratio

The debt-to-equity (D/E) ratio gauges the extent to which a company has financed its operations through debt relative to equity.

Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.

When evaluating Cisco Systems alongside its top 4 peers in terms of the Debt-to-Equity ratio, the following insights arise:

  • In terms of the debt-to-equity ratio, Cisco Systems has a lower level of debt compared to its top 4 peers, indicating a stronger financial position.

  • This implies that the company relies less on debt financing and has a more favorable balance between debt and equity with a lower debt-to-equity ratio of 0.17.

Key Takeaways

The valuation analysis of Cisco Systems in the Communications Equipment industry reveals that its PE, PB, and PS ratios are relatively low compared to its peers. This suggests that the company may be undervalued in terms of its earnings, book value, and sales. However, its low ROE indicates lower profitability compared to its peers. On the other hand, Cisco Systems demonstrates high EBITDA, gross profit, and revenue growth, indicating strong financial performance in these areas.

This article was generated by Benzinga's automated content engine and reviewed by an editor.

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