Cisco Systems, Inc. (CSCO): A Dominant Business at a Bargain Bin Price

Out of this group, the only two businesses that come close to meeting my criteria for investment are Cisco Systems, Inc. (NASDAQ:CSCO) and Juniper.  The problems I would have with Juniper are that its return on equity has not been superb in either the 1-year or 5-year time span, and its current price to earnings growth is on the high side of the valuation range I would consider.

What is a fair value for the stock?

Cisco Systems, Inc. (NASDAQ:CSCO), on the other hand, looks to be firing on all cylinders.  Considering its dominant position in the space (a market cap 10-times the size of Juniper) and its superior cash flow and return on equity, it seems to have a very clear advantage in the competition for my capital.  If the market were to simply value Cisco Systems, Inc. (NASDAQ:CSCO) at a very reasonable PEG or price to cash flow of 15, the stock would rise by 50% from its current level.  This is a company that dominates its space, has built a fortress of a balance sheet and offers a very realistic chance to achieve a compounded rate of return on capital equal to 15% or more over the next 5 to 10 years.  That’s why it deserves a place in the portfolio of any investor seeking a position they can hold for years and collect a safe, steady stream of profits.

The article A Dominant Business at a Bargain Bin Price originally appeared on Fool.com and is written by Ken McGah.

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