Tuesday’s Top Upgrades (and Downgrades): Cisco Systems, Inc. (CSCO), The Ryland Group, Inc. (RYL), iRobot Corporation (IRBT)

This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, our headlines include a downgrade for Cisco Systems, Inc. (NASDAQ:CSCO), balanced out by higher price targets at each of iRobot Corporation (NASDAQ:IRBT) and The Ryland Group, Inc. (NYSE:RYL). Let’s dive right in.

Cisco sinking?
First up, after watching its recommendation run up 30% from November lows, ace analyst Standpoint Research has decided to cash in its chips on Cisco Systems, Inc. (NASDAQ:CSCO). Details on the downgrade are sparse, with not even StreetInsider.com knowing much more than that Standpoint has cut the stock from “buy” to “hold.” But does that mean the downgrade’s not justified?

Honestly… yes, I think it does. Priced at only 12.4 times earnings, and with more than a quarter of its market cap backed up by cash in the bank, Cisco Systems, Inc. (NASDAQ:CSCO) hardly seems expensive today. In fact, if you backed out the company’s mammoth cash hoard, Cisco Systems, Inc. (NASDAQ:CSCO) trades for an enterprise value of only $85 billion. On $9.3 billion in annual profit, that works out to an EV/E ratio of just 9.1 — hardly expensive for an 8.4% grower paying a 2.6% dividend. Plus, as you can probably guess from the size of its bank account, Cisco Systems, Inc. (NASDAQ:CSCO) generates simply stupendous amounts of cash  from its business — about $1.15 for every $1 it gets to report as “net income” under GAAP.

Long story short, this stock is a whole lot cheaper than even its low 12.4 P/E ratio makes it look. Standpoint is wrong to downgrade it, and you should feel confident owning it.

iRobot a buy?
Not so with little Roomba-maker iRobot Corporation (NASDAQ:IRBT). The company just announced that it’s promoted an internal hire to new CFO, upping its own projections for this year’s earnings in the process. iRobot Corporation (NASDAQ:IRBT) now expects to earn between $0.16 and $0.20 per share in the current quarter, a big improvement over previous estimates that said the company might only break even .

This news led Needham & Co. to up its price target on the stock to $28 this morning, on projections of stronger gross margins, and slower growth in costs. But even so, the stock looks too expensive to buy at today’s prices.