Here’s Why Cisco Technology Stock Is Not Your Best Internet Infrastructure Bet

us Akamai Technologies Better Choice Than Cisco’s Current System Akamai’s stock is trading about 5.2 times lower in earnings, only slightly higher than Cisco, which has a P/S multiple of 4.7 times. Is this gap in the company’s valuation reasonable? That difference must grow even bigger. AKAM is benefiting from the pandemic, but Cisco is reducing demand for networking products.

revenue fell from $51.9 billion in FY19 to $49.8 billion in FY21. This was due to a decline in product sales from $39 billion to $36 billion during the period (Cisco’s fiscal year ended in July). Meanwhile, Akamai’s sales rose from $2.9 billion in 2007 to $3.3 billion on an LTM basis due to increased demand for security technology products. This difference means that the increase in sales also affects the increase in the EBIT margin. Cisco’s margins decreased from 29.9% in 2007 to 26.3% in 2009, while Akamai’s margins increased from 19% in 2007 to 20.9% on an LTM basis.

However, there’s a lot more to compare, and AKAM is a better bet than CSCO at this rating as well. Let’s look at past sales growth, operating profit, and operating profit growth for a complete picture of the relative valuations of the two companies. Which stock is better? There are more details on this. Part of the analysis is summarized below.

1. Akamay is the clear winner in revenue growth

Cisco’s sales have been slowed by lower product demand, but Akamai has seen steady sales growth over the past four years. Akamai’s revenue grew 32% from $2.5 billion in 2017 to $3.3 billion on an LTM basis. Meanwhile, Cisco grew nearly 4 percent in the reporting period, from 48 billion US dollars in 2017 to 49.8 billion US dollars last in 2009.

Cisco is a much larger company, generating 15 times more revenue than Akamai, but Akamai’s revenue is growing eight times faster than in 2017.

2. Akamai outperforms Cisco in margin growth

Cisco’s margins declined almost consistently from 28% in 2017 to 26.3% in 2009, while Akamai’s EBIT margin increased significantly from 12.6% in 2017 to 20.9% on an LTM basis. Akamai’s margins are lower than Cisco’s, but considering its profits and fast margin growth, Akamai’s high reputation makes sense.

Akamai’s current debt ratio is 11%, more than double Cisco’s 5%. However, Akamai’s debt itself isn’t too bad, as the company is still growing. On the plus side, Akamai’s cash holdings relative to assets are 32.6% higher than Cisco’s 25.1%.

Whole network

Cisco’s revenue and margins are higher than Akamai’s, but Akamai’s has significantly higher revenues and operating margins than Cisco’s. Given the recovery from Covid, Akamai’s LTM sales were much stronger than the previous fiscal year (2019) with over 14% LTM sales, but Cisco’s LTM sales were roughly on par with 2019. Those levels. Akamai has 25 times the Cisco 18x P/EBIT ratio and 5.2 times the Cisco 4.7x P7 S ratio, but Akamai has strong financial backing. He can continue his performance. We believe this assessment gap could widen over time. As a result, Akamai currently sees it as a better buying option than Cisco stock.

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