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Cisco Systems
Once the highest flying of all the Net stocks, and one of the hardest hit in dot-com bust, Cisco and its CEO, John Chambers, finally began feeling the love again from Wall Street in 2006. And for good reason. For years investors doubted Chambers’ vow that the networking giant could maintain double-digit growth without sacrificing its luxuriant profit margins. But in 2006, Cisco enjoyed 16% growth, while coming in just shy of that historic 20% net income mark—despite integrating operations of far less profitable Scientific Atlanta, the cable set-top box maker it bought in late 2005. That’s a testament to a crisp execution from one of tech’s deepest management teams and text-book balancing of operational and strategic goals. While most big tech firms struggle to succeed outside of their core market—think Intel in processors—Cisco is positioned to cash in on a host of megatrends, from Voice-Over-IP telephone calling to Internet video. The result: Cisco’s stock delivered investors a 28.2% return for the year.
| Overall Grade | A- |
|
| Market Data | CSCO | |
| Market Value (2/28/2007) |
$156.9 Billion |
|
| Profitability* | 28.0% | A- |
| Sales Growth Rate** | 16.5% | B- |
| 12-Month Sales | $31.9 Billion |
|
| 12-Month Net Income | $6.5 Billion |
|
| Total Return | Past 12 Months28.2% | Past 36 Months12.0% |
| Economic Sector | Information Technology | |
| Industry | Communications Equipment | |
The overall sector letter grade reflects how the weighted average of the return on income, or return on equity, and sales growth grades compare with others in the same sector. For the overall grade as well as the ROE/ROI and sales growth grades, an "A" places a company in the top 7% of its sector and an "A-" in the top 14% of the sector. The actual ranking was done using the underlying numerical measures. Grades are for information only.
* For nonfinancial companies, three-year average pretax operating profit before interest and special items as a percentage of average invested capital. For financial companies, pretax profits as a percentage of average shareholder's equity.
*Three-year average annual sales growth based on the most recently reported 36 months, calculated using the least-squares method.
