Great operational performance doesn't necessarily
mean a stock is a great investment. Sometimes, all it takes is a cheaply
rated company to deliver slightly better-than-expected results in order
to deliver good returns to shareholders. Such considerations spring to
mind when considering Cisco Systems' latest third-quarter results. They weren't great, especially when compared with a rival like Juniper Networks in its core switching and routing businesses, but they were enough. So, what are the chances that Cisco can do it again?
Cisco beats its own guidance
At the time of its second-quarter results, there was a sense that the stock could go higher just beating its weak guidance. In fact, Cisco's management had forecast a 6%-8% revenue decline for the third quarter, only to deliver a 5.5% decline. While a mid-single-digit revenue decline is nothing to write home about, there were some positive signs indicating that Cisco can get back to growth.
At the time of its second-quarter results, there was a sense that the stock could go higher just beating its weak guidance. In fact, Cisco's management had forecast a 6%-8% revenue decline for the third quarter, only to deliver a 5.5% decline. While a mid-single-digit revenue decline is nothing to write home about, there were some positive signs indicating that Cisco can get back to growth.
Total orders grew by 1%, and the book-to-bill ratio
was "comfortably above one." Both metrics are an indication of future
growth, but they are also a reflection of how bad Cisco's operational
performance has been. The following revenue growth chart helps to
demonstrate some of the underlying themes.
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