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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 76.11

+0.9%

Nov 21 9:30 AM EST

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To: Box-By-The-Riviera™ who wrote (12053)	2/4/1998 9:28:00 AM
From: Reginald Middleton	Read Replies (1) of 77400

<<<<<<<<<Earnings deceleration (65% to 24%) indicates a considerably reduced PEG from a year ago Q2, yet stock is making new highs. How come? >>>>>>>>>>>>> Cisco has had a decreasing return on invested capital (due to dramatic invested capital growth), but thier ROIC is still WAY above average and they are actually investing more capital. This means that at the end of the day, they are bringing home more money. Accounting earnings cannot be used to accurately guage the value of a company. Return on Invested Capital 1995 1996 1997 Net PPE/Revenues 13.32% 11.86% 17.87% Working Capital/Revenues 17.44% 17.82% 24.23% Net Other Assets/Revenues 0.56% 1.17% 1.22% Revenues/Invested Capital 319.25% 324.24% 230.86% Pre-Tax ROIC 124.99% 115.95% 80.46% Cash Tax Rate 55.03% 69.55% 60.41% After-Tax ROIC 56.21% 35.31% 31.86% After-Tax ROIC (Incl. Goodwill) 56.21% 35.31% 31.86% Source:http://www.rcmfinancial.com/NewMediaFinancial/tour.htm

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