Cisco Systems (CSCO): fair value

Fair-value band

The normal range for this name runs from $31 (cheap) to $93 (expensive); it is now priced at $106.

Is Cisco Systems undervalued?

Expensive. Cisco Systems trades at $106, 72% above the fair value this model estimates; the normal range for this name runs from $31 (cheap) to $93 (expensive).

Diligence checklist

9 pass · 0 fail · 2 no data

• PASSCash actually collected from profit, last 12 months: 125%XBRL · Cisco Systems gets $1.25 of real cash for every $1 of reported profit which means profits are real and not just numbers on paper. That's a good sign.
• PASSGap between paper profit and real cash: -0.7%XBRL · Cisco Systems's "profit on paper" and "cash in the bank" gap is small enough to pass.
• PASSDebt compared to one year of cash earnings: 0.90xXBRL · Cisco Systems could pay off everything it owes, net of the cash it holds, with 0.90 of a single year's earnings. My limit for a name I would buy is three years, so debt is not a risk here.
• PASSHow much more it earns on capital than that capital costs: +7.71ppXBRL · Cisco Systems earns 7.7 points more on the capital it employs than that capital costs. The gap is real but not wide, so growth here creates value at a modest rate rather than compounding it. The gap is no wider than it was at the start of the window.
• PASSStock sold by executives and directors on the open market, last 6 months: $0.0MEDGAR · Nobody running Cisco Systems sold a single share on the open market in the last 6 months. That is the alignment I want: the people with the most information about the business are keeping their money in it. A further $13.2M went out under pre-planned 10b5-1 schedules, which I don't count: those sales are set up months ahead and say nothing about what management thinks today. Options being exercised, and shares held back to cover the tax on them, are not sales and I don't count them either.
• N/AHow long the CEO has run this company: n/aTEXT · I couldn't establish when Cisco Systems's current chief executive took the job: no appointment appears in the 8-K item 5.02 history.
• PASSProfit margin held up during the last sales slump: 65.1% vs 62.7% baseXBRL · The last time Cisco Systems's revenue fell, its profit margin per unit sold only slipped a little, from about 62.7% to 65.1%. It means Cisco Systems isn't being forced to cut prices to keep product moving, which is what a company with a weak competitive position has to do. This is the accounts talking, not the filing: I'm reading the 3 quarters from July 2024 to January 2025, measured against the year going into it, and a shift in what the company sold can imitate pricing power either way.
• PASSNormal profit margin across a full business cycle: FCF margin 22.1% vs 25.6% medianXBRL · Cisco Systems's current cash margin (22.1%) sits a little below its long-run average (25.6%). My valuation grows the average, so a soft patch doesn't get written into the value as if it were permanent. Across the window the margin ran between 20.5% in July 2024 and 34.0% in July 2023.
• N/AHow much of the stock trades on an average day: $2,125MMARKET · Cisco Systems trades so much volume that this basically isn't a concern. There's no pass or fail here because the answer depends on how big a position I'd actually want to take.
• PASSShare of revenue from its single biggest customer: no customer 10%+ of revenue disclosedTEXT · Cisco Systems's September 2, 2026 10-K doesn't disclose any customer at 10% or more of revenue. The accounting rules require that disclosure only when it applies, so its absence means no single customer clears that bar, which is well inside the quarter of revenue where I stop work. This comes from the filing's prose rather than a tagged number: the percentages sit in an XBRL field the SEC's bulk data drops. filing ↗
• PASSWhether the company switched auditors in the last 2 years: noneEDGAR · Companies sometimes switch accounting auditors right before something bad is uncovered which can be a warning sign. Cisco Systems hasn't changed auditors in the last 2 years, so there's no such red flag here.