Why Jim Cramer Called Cisco the Cheapest Large-Cap Tech Stock

During Cramer’s lightning round on CNBC on December 10, Jim Cramer said that Cisco Systems (CSCO) “is currently the cheapest large-cap tech stock.” But why does Cramer think so? Let’s analyze.

Cisco surprised investors with its better-than-expected earnings results in its latest quarter, which was its first quarter of fiscal 2019. In fact, this was the fifth consecutive quarter during which Cisco beat analysts’ earnings estimates. Despite the volatility in the broader markets, Cisco stock has risen 23% in the last year. Let’s take a look at its valuations.

Cisco is trading at a forward PE ratio of 14.1x. In comparison, VMware (VMW) is trading at a forward PE ratio of 24.4x, and Ericsson (ERIC) is trading at a forward PE ratio of 19.5x. Cisco is definitely not an expensive stock.

The company also has a strong balance sheet. In the last quarter, it paid $6.5 billion to its shareholders in share buybacks and dividends. It has consistently increased its dividend payment to shareholders from $0.94 per share in fiscal 2016 to $1.10 in fiscal 2017 and $1.24 in fiscal 2018.