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." While the pinstripe-and-wingtip crowd is entitled to its opinions, down here on Main Street, we've got some pretty sharp stockpickers, too. (And we're not always impressed with how Wall Street does its job.)

Given that, perhaps we shouldn't be giving virtual ink to "news" of analyst upgrades and downgrades. And we wouldn't -- if that were all we were doing. Fortunately, in "This Just In," we don't simply tell you what the analysts said. We 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.

A bird-brained upgrade for Cisco
Speaking of "the best," yesterday saw an upgrade for Cisco Systems (Nasdaq: CSCO) ahead of tomorrow's earnings report. And while it's not surprising to see Cisco upgraded, per se -- after all, it is one heckuva cheap stock -- what is surprising is the source of the upgrade.

Namely, a little known analyst that goes by the pun-friendly name Avian Securities. Now, as you all probably recall, Cisco had a bit of a rough time of things when last it reported earnings. Taking Wall Street by surprise, the company admitted in November that it was losing set-top box share to rival Motorola. Indicators pointed to further market share losses to Juniper (Nasdaq: JNPR) and Hewlett-Packard in Internet switches, and Riverbed (Nasdaq: RVBD) and F5 Networks (Nasdaq: FFIV) in networking products. European sales were weak abroad, while cutbacks in government spending hit Cisco hard here at home.

Result: Cisco shares plunged, and Wall Street slashed its estimates for tomorrow's earnings report to as low as $0.35 per share.

Other result: Cisco got amazingly cheap.

Time to buy Cisco?
Fools who heeded my advice at the time, and "rushed in" where angel investors feared to tread, are now sitting on about a 16% profit from the stock, as bad news morphed into "history," and optimism returned to the stock. The question now is whether all the gains that were to be had, have already been reaped -- or is there more in store?

Avian believes the latter, and judging from its record, you might want to listen to its advice on this one. For while hardly a household name, and not a particularly active stockpicker, Avian does have one of the better records in the industry on the stocks it has deigned to pick. Stocks like:


Avian Said


Avian's Picks Beating S&P by

Riverbed Outperform *** 4 points
Network Appliances (Nasdaq: NTAP) Outperform *** 122 points
Acme Packet (Nasdaq: APKT) Outperform ** 1429 points (!!!)

Now clearly, Avian owes much of its success to finding Acme Packet at an early stage (Avian recommended Acme back in October 2008, and has clung for dear life to this rocket ever since). I dare say that single stock is the reason Avian currently ranks in the top 5% of investors we track on CAPS.

That said, Avian boasts a superb record across the rest of its portfolio as well, making three "right" guesses on its stocks, for every mistake it makes: 75% accuracy, in other words. And call me crazy, call me a Fool -- but I think Avian's calling Cisco right.

Valuation matters
I mean, seriously folks, no matter how much competition it faces, Cisco remains unarguably the dominant player in building the Internet backbone. It's got upwards of $22 billion in net cash, sells for a mere 16 times earnings, and is in fact a whole lot cheaper than it lets on. Peruse Cisco's cashflow statements for a while, and you'll soon notice that this company generates $1.16 in free cash flow for every $1 it reports as "profits" under GAAP accounting standards.

With all this going for it, you might expect Cisco to sell for a premium valuation to what it's actually worth. Instead, Cisco shares fetch lower P/E ratios than rivals Juniper (35 times earnings), Riverbed (174 times), and Alcatel-Lucent (NYSE: ALU), unprofitable and tagged with a P/E of infinity.

Foolish final thought
What's more, at an enterprise value-to-free cash flow ratio of just 10.7, I believe Cisco actually sells for a discount in its own right. With shell-shocked analysts still predicting that Cisco will grow 12% over the long-term "eventually," I'd argue that the least investors should be paying for this stock is 12 times free cash flow.

The fact that we're not yet being asked to pay that much? That, Fool, is what makes Cisco a bargain.

Fool contributor Rich Smith owns shares of Google. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 722 out of more than 170,000 members. The Motley Fool has a disclosure policy.

Juniper Networks is a Motley Fool Big Short short-sale recommendation. Acme Packet is a Motley Fool Rule Breakers pick. The Fool has created a bull call spread position on Cisco Systems. Motley Fool Alpha has opened a short position on Juniper Networks. Motley Fool Alpha owns shares of Cisco Systems.

Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.