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A Look at Cisco Systems’ Valuation Multiples

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Feb. 14 2018, Updated 10:30 a.m. ET

Price-to-earnings ratio

Cisco Systems (CSCO) trades at a forward PE (price-to-earnings) ratio of 14.8, which is similar to the peer average of 14.25x. Ericsson (ERIC) is trading above the average at 19.43x, while Juniper (JNPR), Nokia (NOK), and Hewlett Packard Enterprise (HPE) are trading at 11.47x, 13.8x, and 11.68x, respectively.

Now let’s look at Cisco’s EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) ratio estimates. Cisco trades at a forward EV-to-EBITDA ratio of 9.36x, which is below the peer average of 8.05x. Ericsson is trading above the average forward EV-to-EBITDA ratio at 10.82x, while Juniper, Nokia, and Hewlett Packard Enterprise have ratios of 7.96x, 7.22x, and 4.89x, respectively.

Cisco’s price-to-book ratio stands at 2.93x. The ratios for Ericsson, Juniper, HPE, and Nokia are 1.66x, 1.99x, 1.02x, and 1.51x, respectively.

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EBITDA margin

As you can see in the above table, Cisco’s EBITDA margin is 31%. The margins for Ericsson, Juniper Networks, Nokia, and HPE are 1%, 23%, 7%, and 17%, respectively. The estimated EBITDA growth rate for Cisco is -2%. The estimated rates for Ericsson, Nokia, Juniper, and HPE are -24%, -7%, -12%, and 0%, respectively.

Debt-to-capital ratio

Cisco has a debt-to-capital ratio of 34%. The ratios for Juniper, Ericsson, Nokia, and HPE are 31%, 25%, 19%, and 37%, respectively.

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