Cisco Systems Equity Valuation (CSCO)

University of Edinburgh · Equity Valuation (CMSE11664) · June 2026

Full buy-side style valuation of Cisco Systems (NASDAQ: CSCO) — FCFF DCF, peer multiples, scenarios, reverse DCF, Monte Carlo — with a reproducible Python model and Excel audit trail.

Snapshot

~$49

Base intrinsic

FCFF DCF headline

~$120

Market (as-of)

~2.5× intrinsic

8.9%

WACC

CAPM + Damodaran

4.9%

Rev CAGR

TTM → Year 10

Thesis at valuation date: overvalued on fundamentals. Market price embeds AI-driven growth beyond a moderated-demand path — not a denial that AI networking demand is real.

Value map

Football field

Intrinsic and relative ranges vs market

Red dashed line = market price (~$120). Base DCF mid ~$49. Even bull and peer bands sit well below the market under credible assumptions.

WACC

Equity weight ~94% → WACC close to cost of equity.

Cost of capital

WACC build components

Rf 4.10% after sovereign spread; Ke ~9.2%; WACC ~8.9%.

Growth & cash flows

Base case: TTM ~$61B → Year-10 ~$98B (~4.9% CAGR); FCFF ~$12.7B → ~$17.6B.

Forecast

Base-case revenue and FCFF path

Moderated AI demand: real but partly front-loaded. Terminal g = Rf; terminal reinvestment = g / ROIC > 0.

Process

1

Business

AI cycle vs FY24 reverse · Splunk

2

Historicals

10-K · R&D capitalise · segments

3

WACC

Rf · ERP · Hamada β · MV weights

4

FCFF DCF

10-year · g = Rf · reinvest > 0

5

Stress

Scenarios · reverse DCF · MC

Peers

Arista · Palo Alto · Fortinet · HPE (Juniper) · Broadcom — primary EV/EBITDA, secondary EV/Sales and P/E.

Stack

Python (uv) · openpyxl audit workbook · Typst report · Bloomberg / LSEG / 10-Ks

Competencies

Equity research · FCFF DCF · WACC · relative valuation · reverse DCF · scenario analysis

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