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Strategies & Market Trends : Fundamental Value Investing
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To: E_K_S who wrote (4686)7/3/2025 10:41:59 AM
From: bruwin1 Recommendation

Recommended By
E_K_S

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As a matter of interest, I asked DEEPSEEK for answers to Items (1) to (4) related to the sort of info I put into my EXCEL spreadsheet.
I asked PERPLEXITY the same questions. It could not provide as comprehensive an answer. It couldn't, for example, answer (2) and (3) ----->

Question to DEEPSEEK :-

WHICH OF ITEMS (1) TO (4) DOES CSCO EQUAL OR EXCEED (1) GROSS PROFIT/REVENUE >30%, (2) SG&A <30%*GROSS PROFIT, (3) INTEREST EXPENSE <15%*EBITDA, (4) NET EARNINGS >12%*REVENUE?

Full answer from DEEPSEEK :-

To determine which of the four financial criteria Cisco Systems (CSCO) meets or exceeds, we need to analyze its most recent financial data. Here's a step-by-step breakdown based on Cisco's 2023 Annual Report (fiscal year ended July 29, 2023):

Key Financial Metrics for CSCO (2023):
  1. Revenue: $57.0 billion

  2. Gross Profit: $36.6 billion

    • Gross Margin (Gross Profit/Revenue): 64.2%

  3. SG&A (Operating Expenses): $11.6 billion

  4. EBITDA: ~$17.5 billion (calculated as Operating Income + D&A = $15.6B + $1.9B)

  5. Interest Expense: $640 million

  6. Net Earnings: $12.6 billion

    • Net Profit Margin (Net Earnings/Revenue): 22.1%

Evaluation of Criteria:(1) Gross Profit/Revenue > 30%
  • Calculation: $36.6B / $57.0B = 64.2%

  • Verdict: Exceeds (64.2% >> 30%).

(2) SG&A < 30% of Gross Profit
  • Calculation: 30% of Gross Profit = 0.30 × $36.6B = $10.98B

  • Actual SG&A: $11.6B

  • Verdict: Fails ($11.6B > $10.98B, but close).

(3) Interest Expense < 15% of EBITDA
  • Calculation: 15% of EBITDA = 0.15 × $17.5B = $2.63B

  • Actual Interest Expense: $0.64B

  • Verdict: Exceeds ($0.64B << $2.63B).

(4) Net Earnings > 12% of Revenue
  • Calculation: 12% of Revenue = 0.12 × $57.0B = $6.84B

  • Actual Net Earnings: $12.6B

  • Verdict: Exceeds (22.1% >> 12%).

Final Answer:Cisco meets or exceeds criteria (1), (3), and (4), but not (2).

  • (1) Gross Margin: ?? 64.2% > 30%

  • (2) SG&A: ? $11.6B > 30% of Gross Profit ($10.98B)

  • (3) Interest/EBITDA: ?? 3.7% (<15%)

  • (4) Net Profit Margin: ?? 22.1% > 12%

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