Based on Cisco Systems, Inc.’s (NASDAQ:CSCO) earnings update in January 2019, it seems that analyst forecasts are fairly bearish, with earnings expected to decline by 2.3% in the upcoming year. Though compared to its 5-year track record of the average earnings growth rate of -13%, this is still an improvement. With trailing-twelve-month net income at current levels of US$110m, the consensus growth rate suggests that earnings will decline to US$107m by 2020. Below is a brief commentary around Cisco Systems’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those interested in more of an analysis of the company, you can research its fundamentals here.
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How is Cisco Systems going to perform in the near future?
The longer term view from the 27 analysts covering CSCO is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To understand the overall trajectory of CSCO’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
This results in an annual growth rate of 4.0% based on the most recent earnings level of US$110m to the final forecast of US$121m by 2022. This leads to an EPS of $3.52 in the final year of projections relative to the current EPS of $0.023. However, the near term margins may change heading into 2022, from the current levels of 0.2% to 0.2%.
Future outlook is only one aspect when you’re building an investment case for a stock. For Cisco Systems, there are three pertinent factors you should look at:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Cisco Systems worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Cisco Systems is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Cisco Systems? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at [email protected]. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
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