Cisco (CSCO) stock has generated impressive returns over the last three years. Cisco stock rose 10.3% in 2016, ~30% in 2017, and 8.8% in 2018. The stock has gained ~23% this year despite the recent pullback in May 2019 where Cisco stock has fallen 6.3%.
Cisco stock has increased by a compound annual growth rate (or CAGR) of 25% in the last three years and by 17% in the last five years. Since the start of 2018, Cisco stock has gained 34%.
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Price to earnings
Cisco (CSCO) has a forward 2019 PE multiple of 16.4x. In comparison, Cisco’s EPS are expected to rise 18% in fiscal 2019. Considering Cisco’s dividend yield of 2.6%, the stock looks undervalued at current prices.
What does Wall Street think?
Of the 27 analysts tracking Cisco, 19 recommend a “buy,” eight recommend a “hold,” and none recommend a “sell.” Their average 12-month price target of $56.46 implies that Cisco is trading at a discount of 8% to average estimates.
Cisco is a market leader in most business segments that it operates in. It has achieved revenue growth across businesses in this fiscal year and is looking to improve profit margins as well by increasing subscription revenue.
The shift to software and subscription sales coupled with expanding profit margins and increasing market share in Security will be key to Cisco’s long-term growth.