Cisco's magic number
Two's also the number of reasons I support Oppenheimer's pick this week. Firstly, I do so because the valuation looks just plain irresistible. I mean, selling for 14.2 times trailing earnings, and expected by most analysts to grow at better than 12% per year going forward, Cisco already looks to be pretty fairly priced to me. (That valuation, remember, does not even account for the fact that fully 22% of this company's market cap is made up of cold, hard cash.)
But it gets even better. You see, what you may not know about Cisco is that the reason it has so much money in the bank is that this business generates much, much more cash than its GAAP earnings statements let on. Free cash flow over the past year has topped reported GAAP profits by 16%. With $9.2 billion flowing into its coffers every year, Cisco today trades for just 11.7 times free cash flow, and has an enterprise value-to-free cash flow ratio of only 9.1!
www.fool.com/investing/general/2010/12/07/...d-downgrades.aspx