Cisco Systems ( CSCO ) recently made the Zacks.com Most Searched Stocks list. Therefore, you may want to consider some key factors that may affect the stock’s performance in the near future.

Over the past month, shares of this seller of routers, switches, software and services have returned -1%, compared with a +3.2% change for the Zacks S&P 500 Composite. During that period, the Zacks Computer – Networking industry, which includes Cisco, has lost 0.9%. Now the important question is: What could be the future direction of the stock?

While media reports or rumors about a significant change in a company’s business prospects usually cause its stock to trend and cause immediate price changes, there are always some underlying factors that ultimately drive buy and hold decisions. Let’s move on.

Revenue Estimates Revision

Rather than focusing on anything else, we at Zacks prefer to examine the change in a company’s earnings estimates. This is because we believe that the fair value of its stock is determined by the present value of its future earnings.

Our analysis is primarily based on how sell-side analysts covering the stock are revising their earnings estimates keeping in mind the latest business trends. When a company’s earnings estimates increase, the fair value of its stock also increases. And when a stock’s fair value is higher than its current market value, investors buy the stock, causing its price to move upward. Because of this, empirical studies indicate a strong correlation between earnings estimate revisions and trends in short-term stock price movements.

Cisco is expected to post earnings per share of $0.86 for the current quarter, representing a year-over-year change of -24.6%. Over the past 30 days, the Zacks Consensus Estimate has changed -3.4%.

For the current fiscal year, the consensus revenue estimate is $3.71 points, a change of -4.6% from last year. Over the past 30 days, this estimate has changed by +0.4%.

For the next fiscal year, the consensus earnings estimate of $3.55 points to a change of -4.2% from what Cisco will report a year ago. Over the past month, estimates have changed by -4.1%.

With a strong externally audited track record, our proprietary stock rating tool, ZacksRank, provides a more definitive picture of near-term stock price direction, as it effectively harnesses the power of revisions to earnings estimates. does. Due to the size of the recent change in consensus estimates, along with three other factors related to earnings estimates, Cisco is assigned a Zacks Rank #3 (Hold).

The chart below shows the evolution of the company’s forward 12-month consensus EPS estimate:

12 months EPS

12 Month Consensus EPS Estimates for CSCO _12MonthEPSChartUrl12 Month Consensus EPS Estimates for CSCO _12MonthEPSChartUrl

12 Month Consensus EPS Estimates for CSCO _12MonthEPSChartUrl

Increase in expected income

While a company’s revenue growth is the best indicator of its financial health, if it can’t grow its revenue, nothing much matters. It is almost impossible for a company to grow its revenue without growing its revenue over a long period of time. Therefore, it is very important to know the potential revenue growth of the company.

In Cisco’s case, the consensus sales estimate of $13.52 billion for the current quarter indicates a year-over-year change of -11.1%. Estimates of $53.42 billion and $54.8 billion for the current and next fiscal years indicate changes of -6.3% and +2.6%, respectively.

Last reported results and surprise history

Cisco reported revenue of $12.7 billion in the last reported quarter, representing a year-over-year change of -12.8%. EPS of $0.88 for the same period compares to $1 a year ago.

The reported revenue represented a +1.71% surprise, compared to the Zacks Consensus Estimate of $12.49 billion. EPS surprise was +6.02%.

The company beat consensus EPS estimates in each of the last four quarters. The company has topped consensus earnings estimates every time in the period.

Value

No investment decision can be effective without considering the stock’s valuation. Whether the current stock price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects is an essential determinant of its future price performance.

By comparing a company’s current values ​​such as price-to-earnings (P/E), price-to-sales (P/S) and price-to-cash flow (P/CF), historical values ​​help determine whether Whether the stock is undervalued, overvalued, or undervalued, comparing the company with its peers on these parameters gives a good idea of ​​the reasonableness of the stock price.

As part of the Zacks Style Scores system, the Zacks Value Style Score (which measures both traditional and unconventional valuations) organizes stocks into five groups from A to F (Better than AB; BC is better; etc.), this is helpful in identifying whether a stock is overvalued, correctly valued, or temporarily undervalued.

Cisco is rated C on this front, indicating that it is trading on par with its peers. Click here to see the values ​​of some of the valuation metrics that have driven this grade.

Result

The facts discussed here and many other information on Zacks.com can help determine whether or not the market buzz about Cisco is worth paying attention to. However, its Zacks Rank #3 suggests it may outperform the broader market in the near term.

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