Why Cisco Systems (CSCO) Outpaced the Stock Market Today

In the latest close session, Cisco Systems (CSCO) was up +1.83% at $74.45. The stock’s change was more than the S&P 500’s daily gain of 0.17%. On the other hand, the Dow registered a loss of 0.48%, and the technology-centric Nasdaq increased by 0.46%.

The seller of routers, switches, software and services’s stock has climbed by 7.64% in the past month, exceeding the Computer and Technology sector’s gain of 6.61% and the S&P 500’s gain of 2.38%.

The investment community will be paying close attention to the earnings performance of Cisco Systems in its upcoming release. On that day, Cisco Systems is projected to report earnings of $0.98 per share, which would represent year-over-year growth of 7.69%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $14.78 billion, up 6.78% from the year-ago period.

For the full year, the Zacks Consensus Estimates project earnings of $4.04 per share and a revenue of $59.59 billion, demonstrating changes of +6.04% and +5.18%, respectively, from the preceding year.

It’s also important for investors to be aware of any recent modifications to analyst estimates for Cisco Systems. These revisions help to show the ever-changing nature of near-term business trends. Consequently, upward revisions in estimates express analysts’ positivity towards the business operations and its ability to generate profits.

Based on our research, we believe these estimate revisions are directly related to near-term stock moves. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, there’s been no change in the Zacks Consensus EPS estimate. At present, Cisco Systems boasts a Zacks Rank of #2 (Buy).

In terms of valuation, Cisco Systems is currently trading at a Forward P/E ratio of 18.08. For comparison, its industry has an average Forward P/E of 17.47, which means Cisco Systems is trading at a premium to the group.

One should further note that CSCO currently holds a PEG ratio of 2.53. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company’s expected earnings growth rate into account. As of the close of trade yesterday, the Computer – Networking industry held an average PEG ratio of 1.04.