Cisco Systems (NAS:CSCO) ROIC %

: 14.47% (As of Jan. 2023)

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ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. Cisco Systems's annualized return on invested capital (ROIC %) for the quarter that ended in Jan. 2023 was 14.47%.

As of today (2023-03-21), Cisco Systems's WACC % is 7.42%. Cisco Systems's ROIC % is 14.26% (calculated using TTM income statement data). Cisco Systems generates higher returns on investment than it costs the company to raise the capital needed for that investment. It is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases.

Cisco Systems ROIC % Historical Data

The historical data trend for Cisco Systems's ROIC % can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

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Cisco Systems Annual Data

Trend

Jul13

Jul14

Jul15

Jul16

Jul17

Jul18

Jul19

Jul20

Jul21

Jul22

ROIC %

0.15

15.50

14.88

14.13

14.15

Cisco Systems Quarterly Data
	Apr18	Jul18	Oct18	Jan19	Apr19	Jul19	Oct19	Jan20	Apr20	Jul20	Oct20	Jan21	Apr21	Jul21	Oct21	Jan22	Apr22	Jul22	Oct22	Jan23
ROIC %																14.49	14.61	14.37	13.74	14.47

Competitive Comparison

For the Communication Equipment subindustry, Cisco Systems's ROIC %, along with its competitors' market caps and ROIC % data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.

Annual Data Quarterly Data

Cisco Systems ROIC % Distribution

For the Hardware industry and Technology sector, Cisco Systems's ROIC % distribution charts can be found below:

* The bar in red indicates where Cisco Systems's ROIC % falls in comparison to its industry or sector. The grey bar indicates the ROIC %'s extreme value range as defined by GuruFocus.

Cisco Systems ROIC % Calculation

Cisco Systems's annualized Return on Invested Capital (ROIC %) for the fiscal year that ended in Jul. 2022 is calculated as:

	ROIC % (A: Jul. 2022 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (A: Jul. 2021 )	+	Invested Capital (A: Jul. 2022 ))	/ count )
=	13975 * ( 1 - 18.41% )	/	( (81479	+	79683)	/ 2 )
=	11402.2025	/	80581
=	14.15 %

where

	Invested Capital		(A: Jul. 2021 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	97497	-	3163	-	( 24518	-	max(0, 26257	-	39112	+	24518	))
=	81479

	Invested Capital		(A: Jul. 2022 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	94002	-	3242	-	( 19267	-	max(0, 25640	-	36717	+	19267	))
=	79683

Cisco Systems's annualized Return on Invested Capital (ROIC %) for the quarter that ended in Jan. 2023 is calculated as:

	ROIC % (Q: Jan. 2023 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Oct. 2022 )	+	Invested Capital (Q: Jan. 2023 ))	/ count )
=	14140 * ( 1 - 18.8% )	/	( (78603	+	80048)	/ 2 )
=	11481.68	/	79325.5
=	14.47 %

where

	Invested Capital		(Q: Oct. 2022 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	93054	-	3206	-	( 19784	-	max(0, 24896	-	36141	+	19784	))
=	78603

	Invested Capital		(Q: Jan. 2023 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	95840	-	4529	-	( 22061	-	max(0, 27252	-	38515	+	22061	))
=	80048

Note: The Operating Income data used here is four times the quarterly (Jan. 2023) data.

Cisco Systems (NAS:CSCO) ROIC % Explanation

ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. The reason book values of debt and equity are used is because the book values are the capital the company received when issuing the debt or receiving the equity investments.

There are four key components to this definition. The first is the use of operating income or EBIT rather than net income in the numerator. The second is the tax adjustment to this operating income or EBIT, computed as a hypothetical tax based on an effective or marginal tax rate. The third is the use of book values for invested capital, rather than market values. The final is the timing difference; the capital invested is from the end of the prior year whereas the operating income or EBIT is the current year's number.

Why is ROIC % important?

Because it costs money to raise capital. A firm that generates higher returns on investment than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.

As of today, Cisco Systems's WACC % is 7.42%. Cisco Systems's ROIC % is 14.26% (calculated using TTM income statement data). Cisco Systems generates higher returns on investment than it costs the company to raise the capital needed for that investment. It is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases. Cisco Systems earns returns that do not match up to its cost of capital. It will destroy value as it grows.

Be Aware

Like ROE % and ROA %, ROIC % is calculated with only 12 months of data. Fluctuations in the company's earnings or business cycles can affect the ratio drastically. It is important to look at the ratio from a long term perspective.

Cisco Systems ROIC % Related Terms

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Cisco Systems (NAS:CSCO) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Hardware » Cisco Systems Inc (NAS:CSCO) » Definitions » ROIC %

Traded in Other Exchanges

CSCO:Mexico 0R0K:UK CIS:Germany CSCO:Canada CSCO34:Brazil CIS:Belgium CSCO:Austria CSCO:Argentina

Address

170 West Tasman Drive, San Jose, CA, USA, 95134-1706

Website

https://www.cisco.com

Cisco Systems is the largest provider of networking equipment in the world and one of the largest software companies in the world. Its largest businesses are selling networking hardware and software (where it has leading market shares) and cybersecurity software like firewalls. It also has collaboration products, like its Webex suite, and observability tools. It primarily outsources its manufacturing to third parties and has a large sales and marketing staff—25,000 strong across 90 countries. Overall, Cisco employees 80,000 employees and sells its products globally.

Executives

Sarah Rae Murphy	director	C/O CISCO SYSTEMS, INC., 170 WEST TASMAN DRIVE, SAN JOSE CA 95134
Jeffery S. Sharritts	officer: EVP & Chief Cust & Prtnr Offcr	1200 ABERNATHY RD., NE, STE 1200, ATLANTA GA 30328
Deborah L Stahlkopf	officer: EVP and Chief Legal Officer	C/O CISCO SYSTEMS, INC., 170 WEST TASMAN DRIVE, SAN JOSE CA 95134
Marianna Tessel	director	C/O INTUIT INC., 2700 COAST AVENUE, MOUNTAIN VIEW CA 94043
John D Harris	director	C/O FLEXTRONICS INTERNATIONAL USA, INC., 6201 AMERICA CENTER DRIVE, SAN JOSE CA 95002
Richard Scott Herren	officer: EVP and CFO	851 WEST CYPRESS CREEK ROAD, FORT LAUDERDALE FL 33309
Wesley G Bush	director	333 MAPLE AVENUE EAST, #3080, VIENNA VA 22180
Lisa T Su	director	C/O ADVANCED MICRO DEVICES, INC., 2485 AUGUSTINE DRIVE, SANTA CLARA CA 95054
Carol B Tome	director	55 GLENLAKE PARKWAY, NE, ATLANTA GA 30328
Geraldine Elliott	officer: EVP, Chief Sales & Mktg Offcr	1194 N. MATHILDA AVE., SUNNYVALE CA 94089
Maria Martinez	officer: EVP, Chief Customer Exp Offcr	THE LANDMARK @ 1 MARKET STREET, SUITE 300, SAN FRANCISCO CA 94105
Mark Garrett	director	106 EAST BABCOCK STREET SUITE 3A, BOZEMAN MT 59715
Irving Tan	officer: SVP, Operations and Digital	170 WEST TASMAN DRIVE, SAN JOSE CA 95134
David Goeckeler	officer: EVP, Networking and Security	C/O WESTERN DIGITAL CORPORATION, 5601 GREAT OAKS PARKWAY, SAN JOSE CA 95119
Brent L Saunders	director	2000 GALLOPING HILL ROAD, C/O SCHERING PLOUGH CORP, KENILWORTH NJ 07033