CSCO 47.29 (-0.23%)
US17275R1023HardwareCommunication Equipment

Last update on 2024-06-04

Cisco Systems (CSCO) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Analyze Cisco Systems (CSCO) Piotroski F-Score for 2023, scoring 8/9, reflecting strong financial health. Discover insights on profitability, liquidity, and asset efficiency.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 8

We're running Cisco Systems (CSCO) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

The Piotroski F-Score is a method used to determine the financial strength of a company. It is scored out of 9, with higher scores indicating strong financial health. We've used it to assess Cisco Systems (CSCO) based on profitability, liquidity, and leverage. The company achieved an excellent score of 8 out of 9. For profitability, Cisco consistently had positive net income over 20 years, reaching $12.6 billion in 2023, and operating cash flow surpassed net income, indicating strong financial performance. Liquidity-wise, while some minor declines in ratios existed, leverage had decreased, signaling lower financial risks. Operationally, metrics such as Gross Margin and Asset Turnover Ratio improved and remained strong. However, it's important to note Cisco's current ratio dropped and it has room for efficiency growth, as its Return on Assets (ROA) was below the industry median.

Insights for Value Investors Seeking Stable Income

Based on these analyses, Cisco Systems (CSCO) appears to be a strong, reliable stock with good prospects. Their solid financials, sustainable cash flow, and consistent profitability are highly appealing for investors. Therefore, it's certainly worth considering Cisco for investment, but keep in mind their weaker current ratio and below-industry ROA. Diversifying investments or monitoring these aspects could mitigate risks.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Cisco Systems (CSCO)

Company has a positive net income?

Net income represents a company's total earnings and is a crucial measure of its profitability. Evaluating it determines the firm's financial health, and consistent positive income typically indicates stable business operations.

Historical Net Income of Cisco Systems (CSCO)

The net income for Cisco Systems in 2023 stands at $12,613,000,000. Over the span of the last 20 years, Cisco has consistently shown positive net income figures, demonstrating robust profitability. From 2003's $3,578,000,000 to 2023's $12,613,000,000, the growth trend underscores sustained upward momentum. Most crucially, the positive trend for 2023 adds a point to Cisco’s Piotroski score, reflecting its continued financial strength.

Company has a positive cash flow?

The cash flow from operations (CFO) criterion in Piotroski analysis checks if the company generates positive operating cash flow to add 1 point, otherwise 0.

Historical Operating Cash Flow of Cisco Systems (CSCO)

Cisco Systems (CSCO) produced a cash flow from operations of $19,886,000,000 in 2023, a notable increase from its $13,226,000,000 figure in 2022. This metric's considerable growth over the last two decades further validates its financial robustness. Not only is the CFO positive, but the trend demonstrates a consistent capacity to generate cash from core operations, reflecting the firm's operational health and efficiency. Among the 21 years of data provided, CFO remained positive, marking its highest in 2023. This positive outcome earns Cisco 1 well-deserved point under this criterion.

Return on Assets (ROA) are growing?

The change in Return on Assets (ROA) measures a company's ability to increase profit generation from its assets, signalling efficiency improvements.

Historical change in Return on Assets (ROA) of Cisco Systems (CSCO)

The ROA for Cisco Systems increased from 0.1234 in 2022 to 0.1288 in 2023, indicating improved efficiency in utilizing its assets to generate profits. This trend is positive and adds a point in the Piotroski analysis. However, it's important to note that while Cisco's ROA is improving, it remains significantly lower than the industry median of 0.3903 in 2023. This disparity suggests Cisco may still have room for considerable growth and efficiency optimization. Historically, Cisco has maintained stable operating cash flows over the last two decades, peaking at $19.886 billion in 2023.

Operating Cashflow are higher than Netincome?

This criterion checks if the company is generating more cash from its operations than its net income.

Historical accruals of Cisco Systems (CSCO)

For the fiscal year 2023, Cisco Systems (CSCO) has reported an Operating Cash Flow of $19,886,000,000 and a Net Income of $12,613,000,000. Since the Operating Cash Flow is higher than the Net Income, this is a positive indicator of the company's financial health. It suggests that CSCO is generating ample cash purely from its core business operations, which can be seen as a sign of efficiency and sustainability. Over the past 20 years, operating cash flow has generally exhibited an upward trend, punctuated by some fluctuations, indicating long-term growth in operational efficiency. With fiscal year 2023 showing a significant increase, this denotes strong operational performance, allowing CSCO to invest further, pay off debt, or return capital to shareholders. Hence, for this criterion, we add 1 point indicating good performance.

Liquidity of Cisco Systems (CSCO)

Leverage is declining?

Change in Leverage assesses the company's financial risk by looking at the investment financed by debt. A decrease is favorable as it suggests lower financial risk.

Historical leverage of Cisco Systems (CSCO)

In 2022, Cisco Systems had a leverage ratio of 0.0895, which increased to 0.0654 in 2023. This marks a decrease in leverage, suggesting that Cisco Systems’ financial risk has reduced, and they are less reliant on debt. Over the past 20 years, the leverage trend has oscillated significantly, from highs of 0.2013 in 2016 to the low in 2023. This improvement to 0.0654 signals a strong and safer financial position for the company, thus it earns a favorable score. Overall score for this criterion is 1.

Current Ratio is growing?

The Current Ratio assesses a company's ability to cover its short-term liabilities with its short-term assets. It is a key indicator of financial health.

Historical Current Ratio of Cisco Systems (CSCO)

For Cisco Systems (CSCO), the Current Ratio decreased from 1.432 in 2022 to 1.3845 in 2023, signaling a deterioration in the company's ability to cover its short-term liabilities. Such a decline results in a negative assessment (0 points). Over the last 20 years, Cisco's Current Ratio has fluctuated, peaking at 3.4929 in 2012 and showing a general declining trend since. It has also remained consistently below the industry median of 1.8276 in 2023, which indicates a weaker position within its sector.

Number of shares not diluted?

Change in Shares Outstanding represents the variation in the number of a company’s shares in the market, affecting ownership distribution and stock valuation.

Historical outstanding shares of Cisco Systems (CSCO)

The Outstanding Shares of Cisco Systems (CSCO) have decreased from 4,170,000,000 in 2022 to 4,093,000,000 in 2023. This reduction is positive as it typically indicates share buybacks, returning value to shareholders and demonstrating confidence in future growth. Historically, Cisco's shares outstanding have steadily declined over the past 20 years, peaking at 7,223,000,000 in 2003 and progressively decreasing over time. This reduction trend reinforces confidence in their long-term strategic vision. Therefore, add 1 point for the decrease in 2023.

Operating of Cisco Systems (CSCO)

Cross Margin is growing?

Explain the criterion for Cisco Systems (CSCO) and why it is important to consider

Historical gross margin of Cisco Systems (CSCO)

Gross margin serves as a vital performance metric, especially for tech companies like Cisco Systems. It reflects the efficiency of management in using labor and supplies during the production process. Given Cisco's Gross Margin of 0.6273 in 2023 compared to 0.6255 in 2022, there has been an incremental increase. The improvement by 0.0018 points, although slight, reflects positively on Cisco as it correlates to higher profitability and better management outcomes. Over the last 20 years, Cisco's Gross Margin has seen fluctuations, but consistently outrated the industry median (0.3903 in 2023). In a sector where efficient resource use directly impacts profitability, maintaining a Gross Margin considerably higher than the industry median reiterates Cisco’s competitive edge.

Asset Turnover Ratio is growing?

Asset Turnover Ratio evaluates how effectively a company uses its assets to generate sales revenue.

Historical asset turnover ratio of Cisco Systems (CSCO)

Cisco Systems (CSCO) has exhibited an increase in its Asset Turnover Ratio from 0.5385 in 2022 to 0.582 in 2023. This represents an improvement in the company’s efficiency in using its assets to generate revenue, thus adding 1 point to its Piotroski score. Observing the long-term trend over the past 20 years, Cisco’s Asset Turnover Ratio has experienced considerable volatility, peaking in the mid-2000s with values such as 0.7379 in 2006. This recent uptick in 2023 is a positive development that bucks a general downward trend seen in earlier years. Importantly, an increased Asset Turnover Ratio may imply more optimal asset utilization. Consequently, this trend is favorable and indicates improving operational efficiency.


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