At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the best ...
On a generally down day for stock markets, Cisco (Nasdaq: CSCO) shareholders were among the few investors who were left smiling Monday. For this, you can thank the friendly analysts at Oppenheimer.

Taking pity upon poor, beleaguered Cisco, limping along near a 52-week low yesterday, Oppenheimer conceded that things are looking pretty grim. Motorola's (NYSE: MOT) stealing its market share in DVRs, even as Juniper (Nasdaq: JNPR) and Hewlett-Packard (NYSE: HPQ) encroach on Cisco's Internet switch market. Riverbed and F5 Networks are gaining ground in networking. Meanwhile, IBM (NYSE: IBM) and HP are making plays in cloud computing, threatening the success of Cisco's new partnership with BMC Software to provide "private clouds" to select customers. Not that Cisco needs the competition; it's already got an array of cloud-computing rivals, ranging from to

Grim indeed. And yet, if you ask Oppenheimer, the firestorm of criticism Cisco endured since reporting earnings last month was more than enough to "bake" the bad news into this stock. The analyst concludes these shares are now undervalued, even after cutting its estimates aggressively to "reflect concerns of share losses and margin pressure" (Oppenheimer postulates $1.60 per share in fiscal 2011 profits, which is below consensus estimates).

Competition notwithstanding, Oppenheimer notes that Cisco's "Unified Computing System" is already pulling in $500 million a year, and growing. Combine this with the company's growth initiatives -- consumer electronics, home videoconferencing, the Cius -- and of course its core Internet equipment business, and Oppenheimer thinks Cisco shares could easily hit $23 within a year.

I agree.

Let's go to the tape
Before I tell you why, let's take a closer look at the record of the analyst making this week's pro-Cisco call. Ranked in the top 15% of investors we track on CAPS, Oppenheimer has demonstrated special skill in picking winning stocks in the Communications Equipment industry. Motorola, Ceragon Networks, and Qualcomm are just a few of the names contributing to Oppy's record of 60% accuracy in communications stocks:



Oppenheimer Said

CAPS Rating
(out of 5)

Oppenheimer's Picks Beating S&P by

Qualcomm Outperform **** 38 points
Ceragon Networks Outperform ***** 220 points (picked twice)
Motorola Outperform ** 24 points (picked thrice)

And of course, there's Cisco. Over the four years we've been monitoring Oppenheimer's performance, it's only picked Cisco to outperform twice (including yesterday). So far, Oppy's 2-for-2.

Cisco's magic number
Two's also the number of reasons I support Oppenheimer's pick this week. First, I do so because the valuation looks just plain irresistible. I mean, selling for 14.2 times trailing earnings, and expected by most analysts to grow at better than 12% per year going forward, Cisco already looks fairly priced to me. (Remember, that valuation doesn't even account for the 22% of this company's market cap composed of cold, hard cash.)

But it gets even better. You see, Cisco has so much money in the bank because this business generates much, much more cash than its GAAP earnings statements let on. Free cash flow over the past year has topped reported GAAP profits by 16%. With $9.2 billion flowing into its coffers every year, Cisco today trades for just 11.7 times free cash flow, and has an enterprise value-to-free cash flow ratio of only 9.1!

One down, one to go
That's my primary reason for liking the stock today. But here's a secondary, "fuzzier" reason as well. A few months back, I argued that Cisco's mission is to make people's lives better, and their relationships with technology easier. You see that in the firm's promotion of the Internet in general and DVR technology in particular, in its development of the user-friendly "Valet" home router, and in its purchase of video-made-simple star Pure Digital (maker of the Flip camcorder).

Knowing this about Cisco, and hearing Cisco describe its cloud-computing efforts as an effort to "take the complexity out of companies' cloud efforts," I detect a common theme. And I believe it will win over corporate customers in spite of the competition Cisco faces in the cloud. In short, I've said it before, and I'll say it again: I believe Cisco is on a mission to save the world from the frustration of using modern technology. In the course of doing so, I'll just bet it can do some good for your portfolio.