Technology hardware company Cisco Systems (CSCO) has generated returns of 31% in the last 12 months. The stock was volatile last year but managed to outperform broader indexes with a rise of over 8% in 2018. Since the start of 2019, the stock is up by 32%. Peer companies such as Nokia (NOK), Juniper (JNPR), and Ericsson (ERIC) have generated returns of -3%, 3%, and 10% this year, respectively.
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Cisco stock has generated returns of 100% in the last three years and is up 142% in the last five years. The company has managed to grow earnings at a compound annual growth rate of 7% in the last five years.
The company operates in a mature business environment and has managed to grow sales from $48 billion in fiscal 2017 to $49.3 billion in 2018. Sales are estimated to reach $55.34 billion by 2021.
Cisco stock is currently trading 0.01% below its 52-week high of $56.61 and 41% above its 52-week low of $40.25. With an RSI (relative strength index) score of 74, Cisco stock is trading well into overbought territory.
Is Cisco stock overvalued?
Cisco is no longer a high growth company and thus should trade at a reasonable PE ratio. Cisco has a forward 2019 PE ratio of 20.3x. For 2020, this ratio is 19.0x. Analysts expect Cisco’s sales to grow by 4.8% in 2019 and rise by 3.5% in 2020. Its EPS are expected to rise by 18% in 2019 and 10% in 2020.
Its EPS could grow at a CAGR of 9.9% over the next five years. The stock’s valuation seems reasonable considering these metrics and its dividend yield of 2.4%.
Of the 27 analysts covering Cisco, 19 have given it “buy” recommendations, eight have given it “hold” recommendations, and none have given it “sell” recommendations. The average 12-month target price for Cisco is $114.53, which indicates a potential downside of 2% from its current level.