RE: Forgot to add...
I meant to add that a lot of perception is involved when trying to place a 'value' on a stock like Cisco or Intel, but I had to help pack and send the wife and kids off for Easter Weekend in Salzburg so I wasn't able to finish my post. Not to worry, I will join them tomorrow after I sing Giovanni this evening.
Depending on how much of a historic tornado and bell curve the IP/Broadband technology adoption life cycle provides a company like Cisco, the more one can factor that into the 'equation' of placing a valuation call on its curret market multiple levels. Obviously, the 'market' has valued a lot of this 'vision' into the price of Cisco and time will tell if that type of model was correct or not. I remain very positive on the company and their prospects for the future. Of the Silverbacks, it is hard to match the performance that this company is executing.
The growth rate is much higher for Cisco than for Intel, so I would make the case that a higher multiple is deserved. Whether or not the current height or extreme is exactly in the ball park, I can't say any better than anyone else can. So, I don't want anyone to jump on me for saying in my previous post that 'deals' look like Intel and Qualcomm at the moment. We could make the case that Cisco is a 'deal' longer term as well.
Intel's gross margins in the latest quarter were 63%. Revenues were up 13% from the year ago period. Cash to debt ratio is 9x. Flow ratio of .93.
Here's the Rule Maker Report link:
fool.com
Cisco's gross margins in the latest quarter were 64.7%. Revenues for Cisco for the last quarter were up around 53% from the year ago period and up 9% sequentially (the 8th consecutive sequential quarterly revenue growth for CSCO). No debt. Flow ratio of .99.
Here's the Rule Maker Report link:
fool.com
What's a flow ratio?
The simple calculation here is:
(Current Assets - Cash*)
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(Current Liabilities - ST Debt**)
* Cash = cash & equivalents, marketable securities, and short-term investments
** Short-term Debt = notes payable and current portion of long-term debt
Why is it used?
Well, it's one of the Rule Maker 11 essential steps to investing. Here's the link which explains and calculates the Flow Ratio under step #10:
fool.com
As we already know via our gorilla gaming knowledge, companies like Cisco and Intel meet our criteria. I thought it might be interesting to point out how they meet the criteria of Rule Making which Tom Gardner of The Motley Fool advocates. Keep in mind, Rule Makers are not confined to technology, but the technology companies which qualify must meet the criteria. Current technology companies which qualify for Rule Maker status and are in the Rule Maker portfolio include Cisco, Intel, Microsoft, JDS Uniphase, Nokia and Yahoo!. In our terminology, that's 3 Gorillas, one King, one Prince and one Godzilla.
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