Cisco Systems, Inc. (CSCO)’s Making New Highs, but the Stock’s Still Cheap

Cisco Systems, Inc. (NASDAQ:CSCO) is working toward the future and is no longer playing tit-for-tat with rivals and chasing growth at all costs. But this does not mean that the company is content with 5% growth. While Juniper and Riverbed have looked for ways to cut costs, Cisco has been spending. And a key acquisition of Intucell, a specialist in carrier network automation, just may have signaled where the next leg of growth is going to come from.

Besides, in the meantime Cisco’s core routing and switching businesses are still going to produce tons of cash. The company still owns more than 50% share of that market. And it’s not as if Juniper is in a position to steal market share. And Riverbed has been making new lows each week since reporting a weak fourth quarter. And although F5 has made significant progress lately and has attracted a lot of attention, I think Cisco is one key acquisition away from unleashing serious punishment in the security business. And a deal for Palo Alto networks should get the job done.

What of the stock?
That’s the key question here for investors. I typically get nervous whenever a stock reaches a new 52-week high, but Cisco Systems, Inc. (NASDAQ:CSCO) is in a different category. The company’s maturity and solid fundamentals should prevent volatility swings. And there’s still plenty to be excited about. This is even though the forward P/E does not reflect much optimism. I don’t think the Street has priced in the potential synergistic advantages from recent acquisitions. Plus, just on modest free-cash-flow growth assumptions of 3%, these shares are worth at least $25.

The article Cisco’s Making New Highs, but the Stock’s Still Cheap originally appeared on Fool.com and is written by Richard Saintvilus.

Fool contributor Richard Saintvilus has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems, F5 Networks, and Riverbed Technology (NASDAQ:RVBD). The Motley Fool owns shares of F5 Networks and Riverbed Technology.

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