Buffett Brain · Research note
Score updated 26 Sept 2026 · analysis from 1 Jun 2026
CSCO· Technology
Cisco
Cisco is a sturdy plumber of the internet earning 64% gross margins, but at 39 times earnings the market is charging you a fortune for plodding growth.
Buffett fit
Partial fit
Owner
72
Durability
63
Management
90
Price
4
Score updated 26 Sept 2026 · analysis from 1 Jun 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Technology stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
If I owned all of Cisco, I would be pleased with the cash register. runs at 1.31 times reported earnings, which tells me the profits are real money and not accounting fiction.
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The durability score of 63 sits in the middle, and that feels about right.
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This is the brightest part of the story, and it earns the management score of 90.
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Here is where I take my hat off and walk away. At 39 times earnings the owner-earnings yield is a meager 2.83%, less than a Treasury bill pays with none of the certainty, and the enterprise is priced at nearly 42 times operating profit.
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
7- 1 of 64% shows the products command a real premium and the business keeps most of what it bills.
- 2 of 23% reflects a disciplined, profitable franchise rather than a volume-chasing one.
- 3 runs at 1.31 times net income, confirming the reported earnings are backed by real cash.
- 4Five-year of 19% demonstrates the business has historically compounded capital well.
Concerns
7- 1At 39 times earnings the owner-earnings yield is just 2.83%, meaning you are paying a steep price for very little current return.
- 2The enterprise trades at nearly 42 times operating profit, a valuation that demands growth this business is not delivering.
- 3Revenue is growing only 3.3% a year, so most of the return must come from the already-stretched valuation rather than the business.
- 4Earnings per share have grown a negligible 0.5% a year, leaving almost no organic engine to justify the multiple.
Price history
$110+97.0%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
Cisco sells the switches, routers, and security gear that move data through corporate networks, and increasingly it bundles software and subscriptions on top of that hardware. The economics are genuinely good: of 64% and of 23% show a business that keeps a fat slice of every dollar it bills. The trouble is the engine barely moves, with revenue growing only 3.3% a year and earnings per share crawling at half a percent.
How this analysis has moved
The call has held across 6 reviews.
Sep 27, 2026 → Oct 26, 2026
What other investors would say
The same company, judged by three other documented playbooks.
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