Critical Analysis: Cisco Systems (CSCO) versus Motorola Solutions (MSI)

Cisco Systems (NASDAQ: CSCO) and Motorola Solutions (NYSE:MSI) are both large-cap computer and technology companies, but which is the superior business? We will compare the two businesses based on the strength of their earnings, profitability, analyst recommendations, dividends, risk, valuation and institutional ownership.

Institutional and Insider Ownership

75.8% of Cisco Systems shares are held by institutional investors. Comparatively, 87.9% of Motorola Solutions shares are held by institutional investors. 0.1% of Cisco Systems shares are held by company insiders. Comparatively, 2.5% of Motorola Solutions shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Risk & Volatility

Cisco Systems has a beta of 1.19, indicating that its stock price is 19% more volatile than the S&P 500. Comparatively, Motorola Solutions has a beta of 0.35, indicating that its stock price is 65% less volatile than the S&P 500.

Valuation & Earnings

This table compares Cisco Systems and Motorola Solutions’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cisco Systems $48.01 billion 3.85 $9.61 billion $1.93 19.38
Motorola Solutions $6.04 billion 2.45 $560.00 million $3.91 23.35

Cisco Systems has higher revenue and earnings than Motorola Solutions. Cisco Systems is trading at a lower price-to-earnings ratio than Motorola Solutions, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent ratings and target prices for Cisco Systems and Motorola Solutions, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cisco Systems 0 13 19 0 2.59
Motorola Solutions 0 3 9 0 2.75

Cisco Systems presently has a consensus price target of $36.86, indicating a potential downside of 1.48%. Motorola Solutions has a consensus price target of $94.36, indicating a potential upside of 3.37%. Given Motorola Solutions’ stronger consensus rating and higher probable upside, analysts plainly believe Motorola Solutions is more favorable than Cisco Systems.

Profitability

This table compares Cisco Systems and Motorola Solutions’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cisco Systems 20.26% 16.64% 8.47%
Motorola Solutions 10.51% -92.09% 10.40%

Dividends

Cisco Systems pays an annual dividend of $1.16 per share and has a dividend yield of 3.1%. Motorola Solutions pays an annual dividend of $1.88 per share and has a dividend yield of 2.1%. Cisco Systems pays out 60.1% of its earnings in the form of a dividend. Motorola Solutions pays out 48.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Cisco Systems has raised its dividend for 6 consecutive years. Cisco Systems is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Cisco Systems beats Motorola Solutions on 9 of the 17 factors compared between the two stocks.

Cisco Systems Company Profile

Cisco Systems, Inc. designs and sells a range of products, provides services and delivers integrated solutions to develop and connect networks around the world. The Company operates through three geographic segments: Americas; Europe, the Middle East and Africa (EMEA), and Asia Pacific, Japan and China (APJC). The Company groups its products and technologies into various categories, such as Switching; Next-Generation Network (NGN) Routing; Collaboration; Data Center; Wireless; Service Provider Video; Security, and Other Products. In addition to its product offerings, the Company provides a range of service offerings, including technical support services and advanced services. The Company delivers its technology and services to its customers as solutions for their priorities, including cloud, video, mobility, security, collaboration and analytics. The Company serves customers, including businesses of all sizes, public institutions, governments and service providers.

Motorola Solutions Company Profile

Motorola Solutions, Inc. is a provider of communication infrastructure, devices, accessories, software and services. The Company operates through two segments: Products and Services. The Company’s Products segment offers a portfolio of infrastructure, devices, accessories and software. The Products segment has two product lines: Devices and Systems. The primary customers of the Products segment are government, public safety and first-responder agencies, municipalities, and commercial and industrial customers operating private communications networks and manage a mobile workforce. The Company’s Services segment provides a range of service offerings for government, public safety and commercial communication networks. The Services segment product lines include Integration services, Managed & Support services, and Integrated Digital Enhanced Network (iDEN) services.

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