September 13, 2017

CSCO – Market expectations are for fading Uniform ROA, but management’s confidence about EPS growth, EMEA growth, and their subscription models implies this may be unwarranted


  • Cisco Systems, Inc. (CSCO:USA) is currently trading near recent highs relative to UAFRS-based (Uniform) Earnings, with a 13.1x Uniform P/E. However, even at these levels, the market has somewhat bearish expectations, which may be unwarranted given management’s confidence about growth and their subscription models
  • Specifically, management is confident about the sustainability of GAAP EPS growth and growth in their EMEA segment, as well as the value of their new subscription model Switching products. As such, expectations for Uniform ROA to fade back towards historical lows appear unwarranted, and equity upside may be warranted

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