For those of you that think that CSCO's cash flow is great, I would ask you to actually go read their cash flow statement. When I did, I was shocked. I genuinely thought this whole vendor financing thing was hugely overstated by the bears, but the answer came to me, and it was quite simple: if vendor financing is truly a significant portion of CSCO's earnings, then their cash flow should be far less than income. If cash flow matches or exceeds income, then vendor financing is a non-issue. They are getting paid cash. Period.
So I perused the cash flow statement. Dug down to the bottom line. Computed cash flow per share, and it was nearly equal to earnings per share. Case closed, right? Wrong. I then noticed that a *huge* chunk of their positive cash flow was NOT from operations, but from option exercise proceeds. Their cash flow from operations is nowhere near their earnings per share, meaning that they are likely dependent on vendor financing for a *significant* portion of their "sales". The reason I call it "sales" is that they are exchanging hard assets not for money, but for very questionable equity.
Their price-to-cash flow from operations was more than DOUBLE their price-to-earnings over the first nine months of the year.
Please have a read, and let me know if I've missed something. I genuinely want to be *correct* on this.
Message 14271988
BC |
